NIL vs IRS

[alathIN]

https://www.si.com/.amp/college/2023/06 ... tax-exempt

I wonder how much impact this will have. My guess is that the people willing to plonk down six or seven figures for their team to sign and retain players will still be willing without the tax deduction.

This quote hits the nail on the head:
"‘Wait, what the f--- is going on? The kid promoting the charity is driving around the Mercedes and tweeting about how great this charity is!?’”

I know few of us are likely to sympathize with the IRS, but for perspective, the idea of tax deductible is that the charity provides value to society, such that every taxpayer will pay a little more (or cut some public service) to support the charity's mission.
Putting college athletes into Mercedes probably doesn't meet that criterion.

[AuricGoldfinger]

This seemed inevitable from the start, Incenting players disguised as charity just seemed so obvious, particularly within this context.

[nyyankeeDore]

It is possible (theoretically at least) that the player's support and endorsement of the charity could bring in enough additional donations to justify his compensation. The test is supposed to be that the money paid to the athlete is "reasonable compensation" paid by the business or charitable organization in exchange for the value provided by the athlete.

Of course, there is a huge gap between the way the NIL system is supposed to work and what actually is happening.

[alathIN]

It is possible (theoretically at least) that the player's support and endorsement of the charity could bring in enough additional donations to justify his compensation. The test is supposed to be that the money paid to the athlete is "reasonable;e compensation" paid by the business or charitable organization in exchange for the value provided by the athlete.

Of course, there is a huge gap between the way the NIL system is supposed to work and what actually is happening.

Theoretically possible if, for example, the athlete's NIL deal is to promote an actual charitable organization; wild example, Doctors Without Borders.
The egregious thing here is that some of the NIL collectives themselves are claiming to be charitable organizations.

[historybill]

It's amazing to think that an "institution of higher learning" could have even conceived the notion that an NIL could be set up as tax exempt.

I mean... obviously this is supplemental endorsement income.

[BDR-Dore]

My guess is the NIL organization is a non-profit since it really isn't meant to make money as an organization. The players should be paying taxes on the payments they received. My question is how does this affect the baseball players who get needs based scholarships at VU.

[alathIN]

My guess is the NIL organization is a non-profit since it really isn't meant to make money as an organization. The players should be paying taxes on the payments they received. My question is how does this affect the baseball players who get needs based scholarships at VU.

They get into that in the article - collectives are nonprofit but that doesn't automatically make them charities.

[commadore]

Needs based aid from Vanderbilt should not be treated any differently than any student that receives it. NIL on the other hand, will cause some major tax issues. First, the NIL funds will be subject to Self Employment taxes of 15.3% up to the annual social security maximum, then 2.9% for the medicare portion for the rest. Then you will apply federal and state taxes. Students at VU will be lucky that there is not state income tax, but depending on the amount received, it could be up to 37%. I am betting no one is around to tell the athletes that. If not, there could be some really bad outcomes down the road when the guy with a 7 figure NIL has to pay well over 40% in taxes, but didn't know that and has no where near that amount left.