Nonprofit NIL Collectives Not Tax Exempt

[Chuck]

Meant to put this on the basketball board, but I guess it's just as good here and impacts basketball and football.

This doesn't seem remotely surprising to me. I know these collectives have been pushing the tax exempt status and I just didn't see why it would be exempt. You're putting money into a collective to pay for overpriced "advertisements" at best, and pay for players at worst.

From the story: "According to a memo released from the office of the IRS Chief Counsel, donations made to nonprofit NIL collectives 'are not tax exempt' because the benefits they provide college athletes are “not incidental both qualitatively and quantitatively to any exempt purpose.'"

https://www.si.com/college/2023/06/10/irs-name-image-likeness-collectives-not-tax-exempt

 

[Kolumbo]

Meant to put this on the basketball board, but I guess it's just as good here and impacts basketball and football.

This doesn't seem remotely surprising to me. I know these collectives have been pushing the tax exempt status and I just didn't see why it would be exempt. You're putting money into a collective to pay for overpriced "advertisements" at best, and pay for players at worst.

From the story: "According to a memo released from the office of the IRS Chief Counsel, donations made to nonprofit NIL collectives 'are not tax exempt' because the benefits they provide college athletes are “not incidental both qualitatively and quantitatively to any exempt purpose.'"

https://www.si.com/college/2023/06/10/irs-name-image-likeness-collectives-not-tax-exempt

NIL payments to the athletes are taxable income to the athletes so they are all essentially independent contractors and responsible for self-employment taxes. I wonder how many different types of business expenses they'll take advantage of.

 

[FfldCntyFan]

It could have been worded more correctly.

The primary point is that donations to the collectives aren't tax deductible (can't be listed as a donation on an individual's or a business entity's return).

What tax exempt means (and I would like to see the IRS's application) is that the collective would be required to pay taxes where revenues exceed deductible expenses. At the moment I have no idea how the IRS will treat contributions (as some ordinary form of income?) Or if distributions to student athletes would qualify as a standard expense.

As it is the IRS that we are dealing with don't expect logic to dictate the end results.

 

[Chuck]

The primary point is that donations to the collectives aren't tax deductible (can't be listed as a donation on an individual's or a business entity's return).

That was what I thought was most important.

A friend of mine sat through a pitch from a Big 10 collective. He said they were really pushing the tax deductible angle. I questioned if that was based on an IRS statement. He went back and asked his friend that was trying to get him to donate and the guy said something like "it's 100 percent legitimate. Every collective is doing it." Whenever I hear "everyone is doing it," I go into skeptical mode.

NIL payments to the athletes are taxable income to the athletes so they are all essentially independent contractors and responsible for self-employment taxes. I wonder how many different types of business expenses they'll take advantage of.

Any idea if the schools are helping athletes with this? Actors and musicians get themselves in trouble all the time by spending all their earnings without putting anything aside for taxes. I can imagine a lot of college athletes taking their $200k (more or less) and spending it all.

 

[CTBballfan243]

That was what I thought was most important.

A friend of mine sat through a pitch from a Big 10 collective. He said they were really pushing the tax deductible angle. I questioned if that was based on an IRS statement. He went back and asked his friend that was trying to get him to donate and the guy said something like "it's 100 percent legitimate. Every collective is doing it." Whenever I hear "everyone is doing it," I go into skeptical mode.


Any idea if the schools are helping athletes with this? Actors and musicians get themselves in trouble all the time by spending all their earnings without putting anything aside for taxes. I can imagine a lot of college athletes taking their $200k (more or less) and spending it all.

Let them hire an accountant if they can't handle their financial affairs. Why should the schools help them out?

 

[temery]

My guess is the bleed blue for good will pass the test.

 

[JohnFSilver]

Meant to put this on the basketball board, but I guess it's just as good here and impacts basketball and football.

This doesn't seem remotely surprising to me. I know these collectives have been pushing the tax exempt status and I just didn't see why it would be exempt. You're putting money into a collective to pay for overpriced "advertisements" at best, and pay for players at worst.

From the story: "According to a memo released from the office of the IRS Chief Counsel, donations made to nonprofit NIL collectives 'are not tax exempt' because the benefits they provide college athletes are “not incidental both qualitatively and quantitatively to any exempt purpose.'"

https://www.si.com/college/2023/06/10/irs-name-image-likeness-collectives-not-tax-exempt

Lol. All these collectives gonna fold. What do they get for being in a collective? There is no business purpose. They gonna let businessmen write off potential losses?

 

[JohnFSilver]

That was what I thought was most important.

A friend of mine sat through a pitch from a Big 10 collective. He said they were really pushing the tax deductible angle. I questioned if that was based on an IRS statement. He went back and asked his friend that was trying to get him to donate and the guy said something like "it's 100 percent legitimate. Every collective is doing it." Whenever I hear "everyone is doing it," I go into skeptical mode.


Any idea if the schools are helping athletes with this? Actors and musicians get themselves in trouble all the time by spending all their earnings without putting anything aside for taxes. I can imagine a lot of college athletes taking their $200k (more or less) and spending it all.

They are adults. I would hope they get tax advice.

 

[businesslawyer]

Absolutely the right decision.

 

[uconnric]

Monies contributed to NIL collectives are not tax deductible period, nor should they be since they are not formed for a charitable purpose. They are non-profit entities and do not throw off profits or losses to their contributors who merely make donations.

 

[huskymedic]

 

[CL82]

He also re-emphasizing that the NCAA plans to create more strict NIL rules if Congressional action fails.

"Jimmy if you don't stop watching TV and start on your homework, I am going to give you a vague and unspecified punishment at some vague and unspecified time in the future..."

[Jimmy just put his feet up and keeps watching.]

 

[Nostical]

"Charlie Baker, the new head of the NCAA is looking to Congress to tighten NIL rules and treat NIL collectives as taxable entities, but state legislatures in the SEC are amending their laws to give their member schools an advantage in allowing a school’s "foundation arm" to be more involved in athlete NIL compensation as a non-profit entity. Such a model was announced by Texas A&M earlier this spring. Until Congress acts, the SEC believes it can oversee and police NIL from the Conference level as long as the laws in each of its 12 states mirror one another. The SEC is always a step ahead and it looks like Texas A&M’s move this spring allowed them to open the NIL vaults."
Apropos of that, the amount of NIL promised by Texas A&M to a player (who also received an offer by UConn) was way over the top. We need the BIG XII invite and its revenue stream as soon as we can get it.

 

[uconnric]

"Charlie Baker, the new head of the NCAA is looking to Congress to tighten NIL rules and treat NIL collectives as taxable entities, but state legislatures in the SEC are amending their laws to give their member schools an advantage in allowing a school’s "foundation arm" to be more involved in athlete NIL compensation as a non-profit entity. Such a model was announced by Texas A&M earlier this spring. Until Congress acts, the SEC believes it can oversee and police NIL from the Conference level as long as the laws in each of its 12 states mirror one another. The SEC is always a step ahead and it looks like Texas A&M’s move this spring allowed them to open the NIL vaults."
Apropos of that, the amount of NIL promised by Texas A&M to a player (who also received an offer by UConn) was way over the top. We need the BIG XII invite and its revenue stream as soon as we can get it.

If any school decides to allow its foundation arm to fund NIL, they'll have to answer to the IRS. They've already ruled that contributions to a non-profit entity formed for an NIL collective are not tax deductible. A state legislature can't touch an IRS regulation or ruling.

 

[CL82]

If any school decides to allow its foundation arm to fund NIL, they'll have to answer to the IRS. They've already ruled that contributions to a non-profit entity formed for an NIL collective are not tax deductible. A state legislature can't touch an IRS regulation or ruling.

Except the IRS did not "rule" on anything. They just gave their opinion of how existing law would be applied.

 

[Nostical]

If any school decides to allow its foundation arm to fund NIL, they'll have to answer to the IRS. They've already ruled that contributions to a non-profit entity formed for an NIL collective are not tax deductible. A state legislature can't touch an IRS regulation or ruling.

 

[Nostical]

Except the IRS did not "rule" on anything. They just gave their opinion of how existing law would be applied.

That's how the SEC views it. They play on another level. Just this evening Texas A&M got a commit from a kid with lots of offers, including from UConn. The NIL "guarantee" was insane. No way we or others can compete with that.

 

[dayooper]

That's how the SEC views it. They play on another level. Just this evening Texas A&M got a commit from a kid with lots of offers, including from UConn. The NIL "guarantee" was insane. No way we or others can compete with that. View attachment 88969

Eh, now TAMU needs to do something with it’s players or they will lose them in the portal. A couple of years ago they had the best class ever, bought and paid for. Some have left already and they haven’t done squat since.