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Tax-exempt changes could affect donations

But officials at Iowa, ISU have no immediate concerns about issue

Scott Dochterman

The Gazette

January 20, 2007

[Note: This material is copyright by The Gazette, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of The Gazette.]

  IOWA CITY — Andy Piro and Joan Bowles solicit millions of dollars in contributions for their university athletics departments each year.

  But Piro, executive director of development for the University of Iowa Foundation, and Bowles, Iowa State’s associate athletics director for development, could face major challenges in luring donations if tax-exempt status gets altered or repealed for higher- education contributions.

  ‘‘It would be devastating,’’ Bowles said. ‘‘If those gifts are not tax-deductible, it would have a huge impact on our program.’’

  Dec. 5, during a Senate Finance Committee hearing on tax exemptions and incentives for higher education, Sen. Charles Grassley (R-Iowa) questioned former University of Michigan President Jim Duderstadt about tax breaks for higher education. Grassley based some of his concerns on million- dollar salaries for presidents and coaches, as well as tuitions and fees doubling the economy’s inflation rate over the last 30 years.

  ‘‘There’s been a growing concern, on the part of a great many people, both within higher education and beyond that the increasing commercialization of the big-time programs — college football and men’s basketball — are beginning to distort the academy to some degree,’’ Duderstadt responded to Grassley. ‘‘You see it, in a sense, that the increase in the costs of the intercollegiate athletic system, increasing at three times the rate of the academic costs over the course of the last decade. Part of that may be due to the perversity in the tax code.’’ Grassley said $49 billion in tax benefits will go to people who donate to higher education from 2006 through 2010. A solid share of that money goes to athletics departments. Donations and gifts to Iowa’s athletics department through the Foundation exceeded $6.6 million for the 2006 fiscal year.

  Any change in tax status could have major implications. Mark and Cheryl Falb of Dubuque contributed between $100,000 and $1 million to Iowa’s Kinnick Stadium project. Mark Falb said he’s given similar amounts to the Iowa Business College, University of Dubuque and Iowa College Fund. Any change in tax law significantly would alter his philanthropy.

  ‘‘If they were to eradicate the tax-exempt law, it very definitely would impact my giving,’’ he said.

  Neither Piro nor Bowles has immediate concern over the hearing or a potential Congressional appetite to repeal or reshape a college’s tax-exempt status.

  ‘‘Regarding any speculation (about) Congressional changes relevant to tax laws, that’s what it would be, speculation,’’ Piro said. ‘‘I’m not going to use time or energy on that. Until the time and place and situation changes, I’d be confident the right decision will continue to be made.’’

  Bowles concurred.

  ‘‘Personally, I feel it’s a wait-and-see approach,’’ she said. ‘‘You can speculate all you want about it, but it’s something we’re aware of.’’

  Grassley’s press secretary, Beth Pellett Levine, said the next step is to gather information. If Grassley determines a hearing is necessary, he must seek it through committee chairman Sen. Max Baucus (D-Montana).

  ‘‘From the answers they get from the questions they ask, then they’ll determine whether there should be a hearing,’’ Pellett Levine said. ‘‘(Sen. Grassley is) just looking to make sure taxpayer money is spent wisely.’’

  Bowles and Piro saluted those who give to universities and the benefits received by student-athletes. The University of Iowa spent about $8 million in scholarships for 450 student-athletes this year, Piro said.

  ‘‘Nationwide there’s hundreds of thousands of studentathletes getting almost $1.5 billion in scholarships,’’ Piro said. ‘‘So we do think athletics are an integral part of the university and higher education in general. ‘‘Private giving is a personal decision by individuals. Their motivations run the whole continuum for altruistic reasons to tax reasons.’’