University Daily Kansan / Thursday, September 11, 1986
7
New tax law could affect donations to KU
By KAREN SAMELSON
The effects of the proposed federal tax reform bill are still uncertain, but some KU officials already are wondering how changes will affect charitable donations. "We really don't know how much the tax law tends to motivate people," said Allen Ford, professor of business and a tax specialist. "There is some indication that it does affect thinking."
Congress is expected to pass the tax bill later this month.
In its current form, the bill would reduce the top tax rate from 50 percent to 28 percent, which might affect donations of large sums of money. Ford said.
Another change would mean taxpayers no longer would be able to deduct charitable contributions unless they itemized their taxes, he said.
Some KU officials agree that the changes will adversely affect charitable contributions, but the question is, to what degree.
Others are optimistic that people will continue to contribute to the University even if tax incentives decrease.
Large donations
The biggest concern is the effect of significantly lower tax rates on charitable giving. Ford said.
If a donor in the 50-percent bracket gives $10,000 to the University, his taxable income is lowered by that same amount. Ford said. Because he normally would pay a tax of $5,000 on the $10,000, the gift really costs him only $5,000.
However, under the proposed tax plan, the donor would be in the 28-percent bracket, so his tax rate would be lowered by only $2,800. Thus, the gift would cost him $7,200.
"It's likely that people are going to take a really close look at those contributions." Ford said.
Deductions for state sales tax and interest on creditcard debts and car loans are among deductions scheduled for cutting. Taxpayers may be looking for ways to offset that loss, he said.
Richard Konzem, assistant athletic director, also expressed concern about the effects of the lower tax rate, but he said he didn't know whether the lower tax rate would be an important consideration for donors to the Williams Fund.
The average donation to the Williams Fund is $700, he said.
The fund, which provides scholarships for 400 student athletes, received $2.4 million from 3,200 donors last year, he said.
Smaller donations
Some KU officials are optimistic that donors of smaller gifts aren't motivated by tax deductibility, so they might continue to donate without write-offs as incentives.
Jim Martin, senior vice president of the Kansas University Endowment Association, said, "I don't know
that it's going to impact us negatively.
"Generally speaking, it is the non-itemizer who makes the more modest-sized gift and for whom tax considerations are virtually negligible anyway.
have made the more money in this
Martin estimated that the average donor gave $50. The
Endowment Association maintains a variety of trust
accounts for support of the University. The Endowment
Association received $13.4 million from 32,326 donors in
1985-86.
1983-86. Michael Davis, dean of law, also said he wasn't pessimistic about the effects of tax reform on charitable contributions.
Davis said that most donors to the School of Law gave relatively small gifts, $50 to $500. He said they usually
were motivated by pure altruism, so he hoped people would continue to donate.
Season tickets
Although the main concerns are the lower tax rate and the limitations for non-itemizers. Konzem said, the tax bill also would reduce deductions for business entertainment to 80 percent from 100 percent.
If a business buys season basketball tickets for public relations or to entertain clients, it would be able to deduct only 80 percent of the $144 ticket, he said.
The department sells some season tickets to businesses, Konzem said, but he didn't know how many because the tickets usually were in an individual's name.
Konzem said that the result of this provision would be negligible at KU but that it would hit Major League
But Konzem also said the reform might have some benefits.
Baseball harder because businesses buy more tickets for popular professional sports
because the tax reform limits tax shelters, he said, people who now put money in shelters might decide to give more of it away when the tax shelters are cut.
Martin agreed.
Deductions for itemized charitable contributions would be one of the few deductions left, so it might encourage people to give money, especially because KU has such a worthwhile program, he said.
married age too.
"Naturally, we're pleased that charitable contributions are made more attractive through certain tax incentives," he said, "but gifts of this type are given primarily out of a sense of dedication to the University and in a belief in its mission.
"If anything, donors may become more discriminating in their charitable giving, and therefore I think education should stand to benefit."
Facing cutbacks
Despite possible benefits, Konzem said, "I think it's going to be a problem."
Martin also pointed out that the tax bill was designed with the goal of boosting the economy, so the long-term effect might be to create an atmosphere in which donors could consider charitable giving even more favorable.
Konzem had asked that deductions for non-itemized contributions be reinstated.
The Athletic Department is basically self-supporting, he said. Thirty-five percent of the financing comes from contributions.
Konzem said that if the tax bill took away the department's support base, either the state government would need to chip in more money or programs would have to be cut back.
Because the government is unlikely to increase its support, the department would have to attract new donors to keep funding at the current level, he said.
If the Athletic Department learns that it is beneficial to donate before Jan. 1, 1987, when the tax overhaul would begin to take effect, it will alert donors of that fact, Konzem said.
John Tollefson, dean of business, said programs that depended on contributions would have to work harder to solicit funds if the tax reform hurt donations.
The School of Business earned about $600,000 from contributions and interest earnings on endowed funds in 1985-86, Tollefson said.
the school's allocation from the University budget was $3 million, he said, emphasizing that contributions are a significant part of the school's expenditures.
On campus
Auditions for the KU Basketball Band will be between 10 a.m. and 3 p.m. today and tomorrow in room 300 in Murphy Hall.
- The KU Soccer Club will practice at 5:30 p.m. today at the University soccer fields, 23rd and Iowa streets.
- The KU Women's Soccer Club will practice at 5:45 p.m. today at the university soccer fields, 23rd and Iowa streets.
■ Maranatha Campus Ministries will sponsor a "Back to School Picnic" at 4 p.m. today at Veteran's Park, 19th and Louisiana streets.
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- The KU Chapter of the National Organization of Women will meet at 7:30 p.m. tomorrow in the International Room of the Kansas Union.
+
The Office of Study Abroad will have an informational meeting at 7 p.m. today in the Big Eight Room of the Kansas Union.
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