IRS Says Donations Made to Nonprofit NIL Collectives Are Not Tax Exempt

[OrangeXtreme]

 

[cto]

Such a ruling would be very significant. Many of the big donors to NILs are doing it in part because they are tax-exempt, just like a college or another non-profit. If the IRS takes away the tax-exempt status, donations to NILs will drop significantly because these donors will instead give to the schools (or some other non-profit) in order to get a tax credit.

 

[Orangezoo]

Such a ruling would be very significant. Many of the big donors to NILs are doing it in part because they are tax-exempt, just like a college or another non-profit. If the IRS takes away the tax-exempt status, donations to NILs will drop significantly because these donors will give to the schools (or some other non-profit) instead in order to get a tax credit.

Dangerous waters considering the can of worms this would open. Many non profits outside NIL arguably fall into a similar bucket.

 

[cto]

Dangerous waters considering the can of worms this would open. Many non profits outside NIL arguably fall into a similar bucket.

IRS has already been cracking down on such contributions. For example: Up until a few years ago, payments to schools for luxury boxes, luxury seating, etc were tax-deductible because the check was written to a school. This was changed 4-5 years ago, and such gifts are no longer tax-deductible.

 

[Orangezoo]

IRS has already been cracking down on such contributions. For example: Up until a few years ago, payments to schools for luxury boxes, luxury seating, etc were tax-deductible because the check was written to a school. This was changed 4-5 years ago, and such gifts are no longer tax-deductible.

They've come down even on community organization donations too. Really hurt funding at the last non profit I was at as more donors become hesitant over tax concerns.

 

[Orangezoo]

If the IRS does ultimately rule this is illegal and rejects the tax write off- it will result in multiple lawsuits I presume that tie it up for years. From there who knows. It won't just be the bigger pockets. The many who have submitted smaller contributions will be upset too.

Furthermore, the efforts to allow colleges to pay athletes directly that is also on the table will be an interesting follow in that non profit universities would then just be where the money is sent. The can of worms they opened with NIL had many good intentions but it's an endless string of challenges we see the early signs of already.

 

[kcsu]

Such a ruling would be very significant. Many of the big donors to NILs are doing it in part because they are tax-exempt, just like a college or another non-profit. If the IRS takes away the tax-exempt status, donations to NILs will drop significantly because these donors will instead give to the schools (or some other non-profit) in order to get a tax credit.

Which is why the schools in the sec are moving towards, lobbying for direct involvement permission. See what Florida just approved.

 

[General20]

Feels like the right thing to do. Don't think fans buying players for their favorite teams counts as a charity.

 

[All4SU]

Feels like the right thing to do. Don't think fans buying players for their favorite teams counts as a charity.

Exactly.

 

[Orangezoo]

Feels like the right thing to do. Don't think fans buying players for their favorite teams counts as a charity.

Unfortunately if this does become the case then you will just see a complete reversal on the recent influx of parity.

Short lived benefits for the student athletes as well as funding dries up quickly under the current model.

One additional note- I trust the IRS to handle this fairly and properly about as much as I trust the NCAA. When the IRS stops chasing 500 dollar or less perceived inaccuracies I'll trust they can prioritize and pursue something like this fairly.

 

[newmexicuse]

This may not be good for sports, but I think tax deductions for non-profits should be allowable for humane, environmental, charitable, or similar. many of those organizations already have a difficult time meeting budgets. Dubious competitive places to obtain tax deductions detract from the $$$ available to the really good causes. I really dont see where paying a student athlete to play ball, who is already on scholarship, fits into that profile. Yes, I believe student athletes should be entitled to be able to collect any NIL that may be available to them, but that does not mean NIL payments should be taxpayer subsidized.

 

[kcsu]

This may not be good for sports, but I think tax deductions for non-profits should be allowable for humane, environmental, charitable, or similar. many of those organizations already have a difficult time meeting budgets. Dubious competitive places to obtain tax deductions detract from the $$$ available to the really good causes. I really dont see where paying a student athlete to play ball, who is already on scholarship, fits into that profile. Yes, I believe student athletes should be entitled to be able to collect any NIL that may be available to them, but that does not mean NIL payments should be taxpayer subsidized.

I started a 501c 3 a few years ago and its complicated. We use a firm out of DC that works in the space. Suffice to say from what i have seen the NIL charitable organizations are not sustainable.

 

[Orangezoo]

I started a 501c 3 a few years ago and its complicated. We use a firm out of DC that works in the space. Suffice to say from what i have seen the NIL charitable organizations are not sustainable.

I'd say extremely complicated is a better vernacular. As well as quite expensive to run until you have everything sorted out.

 

[pfister1]

Eliminate the tax deduction for gifts to colleges and universities altogether. Allow schools to establish tax deductible sub entities to do the things that they are doing that truly serve the greater good. Charging students 100s of Thousands of dollars to get a degree is not one of those things.

 

[AZOrange]

Whoopsy

 

[Cheriehoop]

When you think of it, it’s truly amazing how and why NIL was rolled out so quickly with huge repercussions throughout collegiate athletics without even waiting for a definitive ruling from the IRS to know all the tax implications.

 

[tbonezone]

how about we just pass a plate around the dome like church ?

 

[rrlbees]

Good. I hope they help blow up NIL. Make it what it was supposed to be, nil.

 

[RF2044]

Good. I hope they help blow up NIL. Make it what it was supposed to be, nil.

Wish I could like this post 1000 times.

 

[rmtsu]

One thing I haven't heard much about is the tax liability for the players. They would be considered contractors/self employed and not employees I would assume. They would be on the hook for taxes, both income and self-employment payments for social security and Medicare I would think also. Then if they are declared as dependents on their parents taxes there could be implications there also to how their parents or themselves would handle their taxes. Depending on the size of the NIL payments they may need to make quarterly payments for taxes.

Other problems may arise that would complicate things if the athlete lives in one state and goes to school in another or if they do work (whatever they are doing for NIL compensation) in other states.

For non-full scholarship students depending on any grant or need based aid they are getting any income from NIL could affect their FASFA calculations also since they would have to claim this income.

Should be interesting to see how all this plays out. This will open up a host of opportunities for tax professionals I suppose.

 

[newmexicuse]

Good. I hope they help blow up NIL. Make it what it was supposed to be, nil.

Am I interpreting your post to mean that you do not think any payments to players should be allowable ???

Or are you saying there should be some other methodology to pay players besides the NIL process ? If so, what should that process be ?

surely you can’t be saying to go back to the old system where the NCAA and the schools can make billions and the players get nothing but a scholie.

please clarify.

 

[orangefog]

Am I interpreting your post to mean that you do not think any payments to players should be allowable ???

Or are you saying there should be some other methodology to pay players besides the NIL process ? If so, what should that process be ?

surely you can’t be saying to go back to the old system where the NCAA and the schools can make billions and the players get nothing but a scholie.

please clarify.

I'm not speaking for Bees, but it seems pretty clear. Right now "NIL" is pay for play. It should actually be NIL, not a recruiting tool.

 

[althea]

One thing I haven't heard much about is the tax liability for the players. They would be considered contractors/self employed and not employees I would assume. They would be on the hook for taxes, both income and self-employment payments for social security and Medicare I would think also. Then if they are declared as dependents on their parents taxes there could be implications there also to how their parents or themselves would handle their taxes. Depending on the size of the NIL payments they may need to make quarterly payments for taxes.

Other problems may arise that would complicate things if the athlete lives in one state and goes to school in another or if they do work (whatever they are doing for NIL compensation) in other states.

For non-full scholarship students depending on any grant or need based aid they are getting any income from NIL could affect their FASFA calculations also since they would have to claim this income.

Should be interesting to see how all this plays out. This will open up a host of opportunities for tax professionals I suppose.

Yes, these players will now be getting educated on how our tax system works. I would bet that not many will like it.

 

[Sbucketball]

Am I interpreting your post to mean that you do not think any payments to players should be allowable ???

Or are you saying there should be some other methodology to pay players besides the NIL process ? If so, what should that process be ?

surely you can’t be saying to go back to the old system where the NCAA and the schools can make billions and the players get nothing but a scholie.

please clarify.

He's saying NIL was supposed to be players getting paid for signing autographs at the mall or for appearing in a car dealership commercial, which is fine; but it's turned into "here's $800k to enter the transfer portal and come play for us next season", which is not fine.

 

[kcsu]

I'd say extremely complicated is a better vernacular. As well as quite expensive to run until you have everything sorted out.

It is. I give a goody bag and 12.00 to everyone who shows up. The bags contain everything from personal care products to treats like a candy bar or chewing gum. Sometimes we will give backpacks, umbrellas things like that. Each person gets a ten dollar bill and two one dollar bills. The 10 is for themselves. They can buy anything they want. We ask them to give two people each $1 so they can learn to be givers.
If they are willing to submit to a drug test we can get them housing and transportation vouchers.
Sometimes we will give haircuts or nails and feet treatment.
We dont judge and dont preach. We simply want them to feel like human beings for a day.
What you will find is that food isnt the issue. Its housing, mental health and addiction. Much less addiction than i expected.
We currently service fort Lauderdale , Minneapolis, and Dublin Ireland.
We do this all ourselves. Typically between the three locations we will provide for about 700 to 1200 people each Sunday. Everyone also gets a breakfast sandwich or bagel ( yep a bagel) and Orange juice and or Tomato juice.

We have found jobs for over 500. Mostly service industry or Amazon warehouse.

At first my partner and i did it without a 501c status but it simply became too expensive.

My goal isn't to necessarily grow large but to show others who have done well that if they want they can make a difference in their communities.