By Rachel Bachman and Laura Saunders 

On seven game days every fall, more than 50,000 football fans stream into the University of Iowa's Kinnick Stadium eager to cheer on the Hawkeyes.

For years, many of the alumni and fans pouring into the stadium were able to write off much of their season-ticket cost on their federal tax returns. Not anymore.

Fans at other schools also are grappling with changes. Last year, some athletic donations at the University of North Carolina and the University of Mississippi could qualify as a tax deduction and also give the donor access to better seats. In 2018, people making those gifts must choose between the deduction and seat access. At Penn State, donors can be eligible for better seats at home games as well as a tax deduction for certain gifts.

The tax treatment of college football donations has turned into a bewildering tangle thanks to last year's tax overhaul, the most far-reaching rewrite of the U.S. tax code since 1986. Buried in the bill was the repeal of a write-off for so-called seat donations. Internal Revenue Service guidance on lingering questions about the change isn't expected for months.

Seat donations are a longtime practice of many athletic departments. Under this policy, fans of prominent college sports programs across the country typically donate $50 to $4,000 or more per seat to a school's athletic foundation. In return, fans get the right to buy season tickets in stadiums' premium locations. Under prior law, fans could take an 80% tax deduction for the seat donation.

These seat donations became integral to college athletic fundraising. Often the donation far exceeds the cost of the tickets.

At many schools, donations and other tax-deductible donations also yield "priority points," loyalty rewards that accumulate over years. Donors with the most points get first crack at choice seats when available, plus other benefits.

But now the seat-donation write-off is gone. Faced with its loss, schools last year urged fans to pay for several years of seat donations in 2017, and many did.

Among them was Gary Priestap, a 74-year-old University of Michigan fan who owns a small financial-services firm in Brighton, Mich. He is one of the nearly 90,000 Wolverines' supporters who have season tickets to the Big House.

Last December, when he learned that the tax law would repeal the deduction for his 16-seat suite at Michigan Stadium, he paid an extra two years of the $57,000 donation required for his $72,000 suite.

Mr. Priestap has calculated the tax change wouldn't be as burdensome as he initially feared. Still, he says it would increase his out-of-pocket cost for the suite by 25%.

"The program, the success that they're enjoying this year, makes it really fun to have," Mr. Priestap said of the Wolverines, who are 9-1 heading into Saturday's game against Indiana. "If they were 2-10 or something, it wouldn't be nearly as much fun."

Seat donations can make up half or more of the funds raised by athletic foundations. At the University of Georgia's athletic foundation, seat donations provided $40 million of $80 million raised for fiscal 2018. At Ole Miss, seat donations raised $20 million out of $31 million in total contributions to its athletic foundation in fiscal 2018.

Some schools are seeing donor attrition due to the change. At the University of Oklahoma, "there's been some impact because we've heard directly from some donors who have decided not to renew tickets," athletic director Joe Castiglione said. "More than a handful" of fans have cited the tax change as a reason, he added.

Schools hope fan loyalty will help offset the deduction loss, and another tax change could also be a buffer. Millions of filers won't be breaking out charitable donations for 2018, because the overhaul nearly doubled the standard deduction to $24,000 for married couples and $12,000 for singles. Fans who make this switch won't feel the loss of the deduction.

The repeal of the seat donation write-off is expected to raise $2 billion in federal tax revenue over 10 years.

A looming question is how the repeal affects priority points -- the loyalty rewards that determine a donor's place in the fan pecking order. Points accumulate over years, and the more points a donor has, the closer he can move toward the coveted 50-yard line or the more extra tickets he can secure for a rivalry game.

A key phrase of the law says contributions aren't deductible if they could lead "directly or indirectly" to a right to purchase seats.

This phrase raises the possibility that fans who make other athletic donations, such as a large gift to a capital campaign, can't take a tax deduction if they also get priority points that provide prized home-stadium seating benefits. But the law isn't clear.

This lack of clarity is leading to difficult conversations with potential major donors to Georgia giving $100,000 or more, said athletics official Matt Borman.

"They want to have a major impact, and we're having to tell them we don't know if the gift is going to be deductible if they get priority points," he said.

Guidance from the IRS, the referee on this issue, is likely to arrive after many schools have required fans to sign up for next season's tickets. It also will arrive after athletic foundations have issued letters to many donors detailing 2018 deductions early next year.

Tax specialists say it's hard to predict how the IRS will rule. The agency has sometimes been lenient on popular issues where valuation is difficult, such as the taxability of frequent-flier miles.

Michael Graetz, a prominent tax scholar and Georgia fan, said, "It will be hard for the IRS to ignore donations that improve a giver's seat -- but it's not out of the question, especially if the priority points have little value."

Absent IRS guidance on priority points, schools are taking different approaches.

Penn State is telling donors that while they can't deduct seat donations, they can deduct other athletic donations that yield points.

For example, a seat requiring a $600 donation isn't tax-deductible but will earn priority points. But if a fan gives, say, $2,000 on top of that, then the extra $2,000 is both tax-deductible and earns priority points that can improve home-game seating.

"Penn State is complying fully with the new law," said a spokeswoman.

Iowa, meanwhile, is telling donors it won't give them a tax receipt for a donation that earns points that can improve seating. Not having such a receipt makes taking a deduction difficult if not impossible.

At Ole Miss, donors making gifts beyond seat donations must choose. If they get priority points with home-stadium seating benefits, they can't deduct their gift. If they want a deduction, they can have points that help with parking and with seating at away games -- but not better seats at home games. North Carolina is adopting a similar program.

But just as imagination helps when designing a football offense, so can it enhance tax strategies. Beginning this season, Ole Miss offered 22 prime tailgate sites near a stadium entrance for a $17,500 donation per season. The sites have all amenities except catering. Many sites were rented for this season, said a spokesperson with the Ole Miss Athletics Foundation.

The donation for the tailgate sites is 82% tax-deductible.

Write to Rachel Bachman at rachel.bachman@wsj.com and Laura Saunders at laura.saunders@wsj.com

(END) Dow Jones Newswires

November 16, 2018 05:44 ET (10:44 GMT)