According to Tulsa’s athletic director, the impact of the “Tax Cuts and Jobs Act” on college athletic departments is yet to be determined.
It’s no wonder President Trump’s Tax Cuts and Job Act is seeing unprecedented disapproval ratings. America’s favorite sport, college football, receives a devastating blow from the legislation. Amongst a vast array of new tax overhauls, the bill targets two central monetary success markers in college athletics: booster donations and coaches’ salaries. Booster donations, addressed in section 1306 referring to charitable contributions, strips premium-ticket-related donations of tax-deductible status. Additionally, the bill enforces a 21 percent excise tax on the salaries of university employees who are paid more than one million dollars. This will certainly, at nearly every D1 university, be the head football coach. In many cases, the act will increase budget expenditures by more than a million dollars.
Many universities are pessimistic about this legislation. Some predict a cutting of certain non-revenue sports. It is apparent that the bill will most likely lead to huge revenue loss. Many academics praise the act though under the belief that it discourages exorbitant spending on athletics, specifically coaches’ salaries. While a valid remark on the cultural over-significance of athletics in higher education, there is no amount of academia that will tame the fervor for college football and college sports in general.
Dr. Gragg, our athletic director, discussed his thoughts on the potential effect of this bill on the University of Tulsa’s athletic program. One of the main concerns for Dr. Gragg appeared to be the impending excise tax: “Our coaches’ salaries are not exorbitant, even for the American Athletic Conference, which is a huge leap from the Conference USA, which is where we were when I first got here. Our head coaches tend to still make about the median, football and basketball-wise.” The real budget concern that Dr. Gragg notes is “whether the 21 percent excise tax is going to be enforced on the entire salary or starting with the dollar above a million.”
His general impression? It’s too early to tell how severe the effects will be. “Obviously, we’re concerned just like everyone else across the nation,” said Dr. Gragg. “We have more limited premium seating, which is really what the taxes are tied to as far as the contributions.”
The contributions have two parts: “You have seat licenses, and then you have the actual costs of the seats,” says Dr. Gragg. To purchase the season tickets, you must first purchase a “license” which is simply a required donation to the athletic department. The director points out the limited nature though of our own premium seating arrangements: “We have 17 suites for football, while other schools have 100 suites, so it is a little bit different. While the numbers are not as large, it is relative, and it may still affect our bottom line in revenue.”
In addition, he noted that still, “there are different interpretations out there. We have to talk to the IRS, we have to talk to general counsel for the university.” The temporary solution, Dr Gragg said, was, “Before December 31, we encouraged a lot of the current donors to extend their contracts, whether it’s club seats, or whether it’s suites they’ve purchased in the past, and some of them have done that, because they too do not have definitive answers from their own tax consultants on these things.”
Dr. Gragg also ensured that student-athletes are the top priority in this process. “More than anything this money goes to directly support our student-athletes,” he said, “and even with the challenging budget times that this campus has experienced in the last few years, we’ve been able to leave the student-athletes whole especially as it relates to the cost-of-attendance. Any time you have any type of measures that affects you budget-wise or economically, the last thing you want to do is have anything that negatively impacts the student-athlete. We have been able to hold to that since I’ve been here.”
When asked about the impact on smaller programs, such as Olympic sports, Dr. Gragg emphasized that the whole athletics department is in this predicament together. “From my standpoint,” he said, “it would not affect the Olympic sport. It would only affect the entire sports program overall. Whether that’s us going out and asking donors to give more or maybe give the amounts we would be responsible for as far as the excise tax, we’d have to sit down and talk about that. No one specific program will take a hit because of that. We would absorb it as a department.”
Throughout the discussion, it became clear that no matter the effect of the legislation, our athletic department is focused on limiting any strain on individual student-athletes. What will determine the large-scale impact on Tulsa athletics and college athletics in general is not a matter of economics, but of human psychology. Will donors continue the influx of money and the purchase of premium seating without the 80 percent deductions they previously received? This is to be determined. Until then, Tulsa athletics and athletic departments across the country will have their hands full.