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Tuesday, December 26, 2006

Your Tax Code At Work



'Some academics and legislators, contending that college football's multibillion-dollar building boom detracts from schools' educational mission, are targeting tax laws that treat payments for luxury seating and naming rights as charitable gifts.

...Critics say these payments should not be deductible as charity because they purchase a valuable asset -- either premium seating or, in the case of naming rights, advertising. The 80% deduction is "ridiculous," says Smith College economist Andrew Zimbalist, author of a book on college sports. "I don't think intercollegiate sports support the educational mission. It's a separate activity."

A tax deduction for luxury boxes "isn't my style," says Rebecca McGowan, one of the University of Michigan's eight regents. She initially opposed the Michigan renovation out of concern that skyboxes "were going to be enormously expensive, for the benefit of relatively few people." But she switched sides after receiving assurances that more athletic revenue would be devoted to academic programs.

Mr. Duderstadt, the former Michigan president, told the Senate Finance Committee at a hearing this month that the "perverse treatment" of "mandatory fees" for luxury-skybox leases and season-ticket licenses as charitable contributions is "fueling an arms race in college sports, driving universities to debt-finance massive stadium expansion projects, exploit young student athletes, and tolerate multimillion-dollar coaches' salaries."

...Even with the 80% deduction, some universities haven't raised as much money from premium seating as anticipated. The University of Colorado has leased nearly all of its 40 luxury suites but only 38% of 1,850 club seats, which cost between $1,500 and $2,200 a year, athletic director Mike Bohn says. Revenue from suites and club seats falls just short of the $3.2 million needed to pay down debt, he said, instead of the $5.7 million that leasing all of the seats would generate.

Opponents of Michigan's renovation doubt the university will find enough customers for its luxury suites, where alcohol will be banned. "Why pay a whole bunch of money, drive up to Ann Arbor, sit behind a glass wall and not be able to get a beer," says Laurence Deitch, one of two regents on the university's eight-member board who voted against the plan last month. "I think I'd stay home."'



--wall street journal--