It is a common practice among many top-tier universities and colleges to “require” that alumni or other donors make a threshold donation in order to obtain access to a ticket lottery to sporting event tickets. Currently, the tax code permits donors making these type of “donations” to deduct 80 percent of the contribution amount, a decrease from the normal 100 percent deduction because of the perceived receipt of benefit obtained. But the Obama administration, as part of its proposed budget for the 2017 fiscal year, wants to remove the deduction entirely for these types of donations.
Popular collegiate sports programs often offer premium access to sports tickets to donors who make donations to the college or university. These contributions are only eligible for a reduced charitable deduction on a tax return because donors are getting a benefit in exchange for their donation. But rather than deduct the fair market value of the ticket access benefit, Congress allows donors to take a deduction of 80 percent of the contribution. See Code § 170(l).
IRS Publication 526 states the agency’s view of the law as:
If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution.
As part of the President’s proposed 2017 fiscal budget, the Treasury Department includes an explanation of a revenue proposal that intends to deny the deduction for contributions that give donors special access to purchase sporting event tickets. If enacted into law by Congress, such a provision could limit the continuing attractiveness of these donation-access programs by colleges. In effect, a complete denial of a charitable deduction to the donor could substantially increase the cost of an educational institution’s sports ticket since a tax benefit would no longer accrue. The administration proposal would be effective for contributions in a tax year beginning after Dec. 31, 2016.