U.S. Senators Ben Cardin (D-Md.) and John Thune (R-S.D) recently introduced the Athlete Opportunity and Taxpayer Integrity Act. The goal of the bipartisan legislation is to protect student athletes by preventing individuals and organizations from using the charitable tax deduction for contributions that compensate them for the use of their name, image, and likeness (NIL).
Nonprofits and NIL Collectives
Now that student athletes can monetize their name image and likeness, there has been an increase in sports endorsements in the non-profit sector whether it is the nonprofits themselves looking to partner with athletes to promote charities for a fee, or promotion partnerships through NIL Collectives. NIL Collectives are groups forming such as alumni or boosters, whose goal is to provide athletes with NIL opportunities, such as partnering with local businesses and charities. The athletes are compensated by the collective.
What is the Proposed Legislation?
Since the recent adoption of the NCAA’s NIL rules, some organizations have made payments to college athletes while also claiming 501(c)(3) charitable status, making their athlete contributions tax deductible. Senators proposing the legislation note that this is inconsistent with the intended purpose of the charitable tax deduction, and that it forces taxpayers to then subsidize athletes’ recruitment and payments. The legislation sets up taxpayer guardrails that prohibit any entities from inappropriately using NIL agreements to reduce their own tax obligations. The goal to ensure that the opportunities available for student athletes to benefit from their own name, image and likeness are protected, while protecting taxpayer funds.
Who Would the Legislation Apply To?
The Act would apply to individuals, organizations and collectives, however educational institutions would be exempt.
What Happens Next?
This can have major tax implications for both the sponsors and the athletes. Gibney is closely monitoring the legislation and will continue to provide updates. For questions, please contact info@gibney.com.