From the WSJ today, with a few select passages. Aggies highlighted in the article.
The tax agency’s decision, announced in a 12-page legal memo, will disrupt some collectives’ plans for paying top-tier athletes for their name, image and likeness (NIL). Since the NCAA changed its rules in July 2021 to let college athletes sign endorsement deals, scores of collectives sprung up alongside universities, some claiming charitable status so they can solicit tax-deductible
donations from rich supporters to pay athletes.
“This is not going to put the NIL industry out of business. It just means they’re going to have to pay taxes.”
Determining the precise nature of the relationship between universities and these fundraising operations can be murky. At Texas A&M, the 12th Man Foundation, a longstanding fundraising arm that operates separately from the university, brought its collective in-house by starting the 12th Man+ Fund specifically to facilitate endorsement deals for Aggies athletes. The 12th Man Foundation is registered as a 501(c)(3) organization that funds scholarships and facility upgrades,
among other things.
The 12th Man+ Fund is similarly opaque when it comes to the question of whether donations to it qualify as tax deductible. The fund’s website says donations “may be up to 100% tax deductible” but advises donors to “consult their tax advisor.”
What happens now isn’t clear and may vary depending on the activities of each collective. Some organizations may have their charitable status revoked prospectively, while others may lose it retroactively if their actions varied greatly from what they said on their applications to the IRS, tax lawyers said. Separately, Sens. John Thune (R., S.D.) and Ben Cardin (D., Md.) last year proposed denying the charitable deduction for payments directed to college athletes.
IRS Nixes Tax Edge for College-Sports Booster Groups Paying Athletes
Getting cash to college athletes isn’t a charitable purpose, the IRS says. Audits could follow.
The Internal Revenue Service began blocking an increasingly popular method for funneling wealthy boosters’ money to college athletes, declaring that so-called “name, image and likeness” collectives generally can’t be structured as charities.The tax agency’s decision, announced in a 12-page legal memo, will disrupt some collectives’ plans for paying top-tier athletes for their name, image and likeness (NIL). Since the NCAA changed its rules in July 2021 to let college athletes sign endorsement deals, scores of collectives sprung up alongside universities, some claiming charitable status so they can solicit tax-deductible
donations from rich supporters to pay athletes.
“This is not going to put the NIL industry out of business. It just means they’re going to have to pay taxes.”
Determining the precise nature of the relationship between universities and these fundraising operations can be murky. At Texas A&M, the 12th Man Foundation, a longstanding fundraising arm that operates separately from the university, brought its collective in-house by starting the 12th Man+ Fund specifically to facilitate endorsement deals for Aggies athletes. The 12th Man Foundation is registered as a 501(c)(3) organization that funds scholarships and facility upgrades,
among other things.
The 12th Man+ Fund is similarly opaque when it comes to the question of whether donations to it qualify as tax deductible. The fund’s website says donations “may be up to 100% tax deductible” but advises donors to “consult their tax advisor.”
What happens now isn’t clear and may vary depending on the activities of each collective. Some organizations may have their charitable status revoked prospectively, while others may lose it retroactively if their actions varied greatly from what they said on their applications to the IRS, tax lawyers said. Separately, Sens. John Thune (R., S.D.) and Ben Cardin (D., Md.) last year proposed denying the charitable deduction for payments directed to college athletes.
