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IRS Ruling on NIL Matters

07.06.23 written by

The NCAA and student athletes have been battling in court for a number of years over the student athletes’ right to be compensated for their athletic endeavors.  In 2021, the NCAA adopted a policy, called the Name, Image, and Likeness Policy. (NIL).  This policy allows student athletes to be compensated for their name, image, and likeness so long as they are performing various activities, such as signing autographs and making appearances in person or in radio or television commercials.  Many people believe that these NIL agreements are bad for college athletics because they are basically allowing schools with big boosters to sway college athletes to their favorite universities.

As a result of this new NCAA policy, organizations have been created, referred to as NIL collectives.  These NIL collectives have been established by boosters and fans, sometimes as nonprofit organizations and other times through an affiliation with a nonprofit organization.  Individuals have then been donating money to these NIL collectives and taking a tax deduction.

Recently, the IRS has issued a memorandum stating that many of these organizations are really operating for non-exempt charitable purposes and, therefore, will not be considered an exempt organization under Internal Revenue Code Section 501(c)(3).  This means that those individuals who are making contributions to these NIL collectives will not be able to take a tax deduction on their income tax returns.

This appears to be the first step of how the IRS will be analyzing the use of NIL agreements and the tax treatment for NIL collectives.  It will be interesting to see how the tax rulings may affect the use of NIL agreements.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
405 Chauncey Avenue NW
New Philadelphia, Ohio 44663
Phone: (330) 364-3472
Fax: (330) 602-3187