By Troy Tutt
The Wall Street Journal‘s Ruth Simon published a piece today about how the 2017 tax law is causing companies to radically change the way they host client events.
The problem? Companies can no longer deduct 50% of the cost of taking customers to live events, such as sports games. “That’s the one that has got everyone jumping up and down,” says Marianna Dyson, of counsel to Covington & Burling LLP.
“It is a different world,” says KPMG Partner Terrance Richardson. “Companies are no longer able to deduct the expense of taking a client to a ballgame, to a golf tournament, or to any entertainment-type event.”
(For answers to some of the most common questions companies have about how the new tax law affects sports tickets, download TicketManager’s New Tax Law FAQ.)
While Congress claims the new limits will produce more than $41 billion in new tax revenue between 2018 and 2027, these changes are creating huge displacements for teams, venues, local businesses, and companies.
“We have season Rams tickets, the invoice is sitting on my desk,” says Casandra Williams, Chief Executive of A-Tech Consulting in Orange, California. “Do we do this, or do we not? What is our return on investment?” In fact, 45 percent of small business owners say they will be affected by these new limits, according to the Wall Street Journal.
“Usually when we hear teams talk about an increase in non-renewals, winning teams and big markets are immune,” says Tony Knopp, co-founder and chief executive of TicketManager, which makes it easy for companies to manage tickets and prove the ROI. “We are getting calls from teams that are winning, that have huge fan bases, saying ‘We are losing customers because of the deduction.’“
Even before the new tax law went into effect, companies often struggled to prove the ROI of sponsorships and sports tickets. Without the ability to easily prove the benefit, company sports tickets were often seen as a boondoggle— something that was fun to do, but which yielded few measurable results. By contrast, organizations using the right tools can easily demonstrate the value of their tickets— a huge advantage, given the massive changes that are taking place in client entertainment today.
“Technology is going to be pretty important in the way that we track all of this information,” says KPMG’s Terrance Richardson.
New changes in the tax law, the end of print and PDF tickets, and fresh concerns about whether company sports tickets will get cut as we enter a period of increased market volatility are placing companies under more pressure than ever to prove their tickets are working.