The new tax law recently passed by Congress contains an interesting wrinkle that I think was somewhat lost in the bigger debate. That wrinkle could play out a number of different ways. There’s no doubt in my mind that it will be a kick in the jimmy for ticket or hospitality sales. It could, however, provide a nice lift to a team’s sponsorship sales efforts.
Tickets to sporting events are no longer tax deductible.
For as long as I’ve been in the sports business, tickets have always been a write-off on your taxes. That has always made the lives of those responsible for selling premium seating a bit easier. Even still, selling premium ticket inventory takes a lot of skill and some of the best in the business work for the teams in our local market. Corporate hospitality can account for a sizable percentage of overall ticket sales for any given team.
For sponsors, tickets and suites are part of almost every contract. That’s a marketing expense and a write-off.
For others, the rules have changed. If you buy a suite or tickets from a particular sports team that purchase is no longer tax deductible regardless of who you give the tickets to.
Now don’t get me wrong … like water running down a mountain, corporate America and the teams that provide these assets will most certainly find a way around these new laws. Some will argue that the more lenient tax rates free up money for more of these types of purchases.
What Would I Do If I Sold Tickets?
If I was working for a team, I would most certainly want to get ahead of this as it may not become entirely evident to your client until they do their taxes next year.
I might try to figure a workaround that creates a type of micro-sponsorship that provides a company with a small, but legitimate, marketing component that also comes with the hospitality assets they seek. This will be easy for the pro teams in the market and perhaps, a little more challenging for colleges where sponsorship and ticket sales sometimes operate independently of each other.
The new tax laws will most certainly pose a bigger challenge for colleges as not only do they face this corporate tax issue but also many colleges (including ASU) require a tax-deductible “gift” for the purchase of football tickets.
In fact, 60% of the actual cost of my season tickets is or was a tax-deductible gift.
That’s significant and that’s going to be a real problem for colleges moving forward. If fans can’t deduct the cost of their tickets they may opt to stay home and watch the game on TV. There are other, deeper implications for college athletics that this new tax law will have but that’s another blog topic for another time.
Just know that you won’t see a bunch of AD’s voting for Trump in 2020.
The new tax law will most definitely have an impact on how corporate America purchases tickets and how sports teams sell premium hospitality assets. I am certain that the teams affected by this are on it and devising ways to make certain they are not negatively impacted by these new laws.
For me, it will be interesting to watch … from my living room of course.