Revenue / 02.12.18

How Will the New Tax Law Affect Ticketing Interests?

Teddy Durgin

The newly enacted Tax Cuts and Jobs Act (TCJA) has received mixed reviews, particularly for the ticketing industry. While companies are doling out bonuses and major corporations are making plans to invest back in the United States, the new law has some repercussions for how tickets are sold, particularly in college sports.

The reform has done away with boosters’ ability to take a tax reduction on the donation related to their season tickets. Previously, fans could deduct 80 percent of the donation necessary to get prime seats, but under the new tax code, they cannot. The change is controversial to be sure, but the deduction has been in Congress's crosshairs since the Reagan era. Its repeal was feared but somewhat expected.

Some colleges and universities became proactive in the weeks leading up to the bill being signed into law by President Trump. Emails were sent to boosters, making them aware that donating money before Jan. 1 for the 2018 season — and even beyond ― would give them the current deduction. ESPN.com reports that Southern Methodist University, Florida State and the University of Oklahoma all offered boosters the ability to pay for multiple years of season-ticket donations up front to be able to take advantage of the expiring deduction. The so-called "Pay It Forward" suggestion was not an easy one to make, said Oklahoma athletic director Joe Castiglione. "You can't just paint everyone with a broad brush," he said. "You have to know who these people are and their capacity to do what you are suggesting because they're all at different income levels."

Marquette Wire reports that Marquette University was also proactive in informing season ticket holders they would no longer be able to take a deduction on seating priority contributions, which go toward student-athlete scholarships. Previously, Marquette fans could buy season tickets, donate to the Blue and Gold Fund to get better seats and then get 80 percent of that donation deducted from their taxes, as it was considered a charitable donation..

As to the impact moving forward, the article quoted Marquette spokesman Chris Jenkins as stating: "We simply do not know for how many of our valued season ticket holders the deduction has been important, or to what extent."

Meanwhile, TCJA's elimination of business entertainment deductions could have a negative impact on hospitality spending, including ticket sales. Under the old rules, companies could deduct 50 percent for a variety of expenses, including concert and sports tickets, charitable event tickets and client meals. The new law allows no deduction for activity generally considered to be entertainment, amusement or recreation. Consequently, companies will be scrutinizing budgets much more carefully, asking questions like, "Should that stadium suite be renewed?" and "Does that golf outing still make sense?"

The decreased deduction will likely reduce business entertainment spending, especially at smaller and mid-sized companies. Among those most displeased are golf course owners and operators. Late last year, a group of four major industry representatives ― the Club Managers Association of America, the Golf Course Superintendent Association of America, the National Club Association and the National Golf Course Owners Association — penned a letter to Capitol Hill legislators pleading with them not to eliminate the deduction. It was to no avail.

One thing that did survive the intense December 2017 debating on Capitol Hill was the tax exemption that helps pro sports team owners build stadiums and arenas at public expense. Under the law as it still stands, cities and states can issue tax-exempt bonds to build these venues. The U.S. House of Representatives' version of the tax bill eliminated the stadium subsidy. The Senate bill did not. When the two sides assembled to hammer out the differences, the Senate prevailed.

Stay up to date on regulatory changes' effects on ticketing industry at the INTIX 40th Annual Conference, taking place Jan. 29-31, 2019, in Texas. Come together with your colleagues for a three-day event that includes a comprehensive educational program highlighting industry trends and innovations, an exhibition featuring companies that offer a wide range of ticketing products and services and opportunities to network with peers and business partners.

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Tags: Sports , Regulations , News