College sports is a President Trump signature away from potentially having to make major changes to how tickets are sold.
The tax reform bill, approved in the Senate early Wednesday morning and in the House later in the day, gets rid of the ability for boosters to take a tax deduction on the donation related to their season tickets.
Previously, fans could deduct 80 percent of the donation that is necessary to get prime seats.
In recent weeks, faced with uncertainty about how the new law would affect ticket purchases, colleges have sent emails to their boosters, making them aware that donating money before Jan. 1 for the 2018 season -- and even beyond -- would give them the current deduction.
SMU, Florida State and Oklahoma have offered boosters the ability to pay for multiple years of season-ticket donations up front to be able to take advantage of the current deduction.
In a plan they have loosely called "Pay It Forward," the Sooners have suggested that donors consider paying the next three years of fees in this calendar year, so that they could get the deduction.
"These are not easy suggestions to make," Oklahoma athletic director Joe Castiglione said. "Because you can't just paint everyone with a broad brush. 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."
Castiglione said it's way too early to know how hard the schools will be hit, but he said he has "come to the conclusion that the impact is going to be significant."
Another part of the bill puts a 21 percent excise tax on tax-exempt employers, like universities, for any of the top five employees who make more than $1 million.
One athletic director, who requested anonymity, said contracts could go back to how they were structured in the past, with the school giving a small base salary and each component being paid by the business by that contributes.
In recent years, for the sake of convenience, schools have aggregated the fee they paid a coach for marketing and media. Unbundling that to allow for each entity to pay individually for being involved with the coach could allow a school to get around the ruling -- but even that will be difficult. If the Internal Revenue Service determines that the school is ordering the entities to structure in this way for tax purposes, it won't be considered an arm's-length transaction and will still be taxed, said Bennett Speyer, who has structured compensation packages for college coaches including Jim Harbaugh, Matt Campbell and Rich Rodriguez. This is why having a booster club or foundation pay part of a coach's salary won't be considered any different from the school paying it.
Speyer, a tax lawyer and chair of Shumaker, Loop & Kendrick LLP's Sports Industry Practice, said schools might have to get creative if they don't want to pay the tax on contracts above $1 million. Michigan's $2 million raise to Harbaugh came in the form of paying off an annual life insurance policy that Harbaugh can withdraw money from with little to no interest. The money Harbaugh withdraws isn't taxed as compensation; the only thing that is taxed as such is the fair-market value of what the interest rate would be, which makes a huge difference.
"You also might see more deferred compensation," Speyer said, "where coaches aren't paying taxes and schools aren't paying that excise tax until the money actually vests."
As with any creative methods of accounting, especially among the higher earners, the IRS is expected to heavily scrutinize any common practice that becomes a loophole.