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

[kirbivore]

guess I'll have to direct future SU recruits to the Grand Cayman Red Sea trading company for payment.

 

[rrlbees]

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’ve said this before but I use NIL and nil to differentiate what I’m talking about. I have ZERO problem with athletes taking advantage of their name, image and likeness to make some money doing autograph sessions, making appearances at an event, running a bball camp, doing meet and greets, sponsoring products, etc. That was the intent of nil. But in many cases it has become NIL, which is not name, image and likeness. It’s strictly pay for play and completely based on your athletic ability.

 

[orangefog]

I’ve said this before but I use NIL and nil to differentiate what I’m talking about. I have ZERO problem with athletes taking advantage of their name, image and likeness to make some money doing autograph sessions, making appearances at an event, running a bball camp, doing meet and greets, sponsoring products, etc. That was the intent of nil. But in many cases it has become NIL, which is not name, image and likeness. It’s strictly pay for play and completely based on your athletic ability.

That's the NCAA failing again. They should have had a plan in place. They still have no clue how to control it, nor do I believe do they care to. The schools that they cater to are the one's benefiting the most, at this point. Although, there are some upstart schools starting to take advantage. This may force the NCAA in to doing something.

 

[newmexicuse]

I’ve said this before but I use NIL and nil to differentiate what I’m talking about. I have ZERO problem with athletes taking advantage of their name, image and likeness to make some money doing autograph sessions, making appearances at an event, running a bball camp, doing meet and greets, sponsoring products, etc. That was the intent of nil. But in many cases it has become NIL, which is not name, image and likeness. It’s strictly pay for play and completely based on your athletic ability.

I respect your opinion, but personally I have no issue with athletes receiving pay for play when the primary purpose of the entire system is enabling the NCAA (No Compensation for Any Athlete) and the schools to make billions off of their talent. Collegiate sports is big business. If we want talent at the college level, let them get paid what they are worth, otherwise, anybody who is any good will be g league or foreign. Most of these kids come from impoverished backgrounds, why shouldn’t they be able to help their families ? Why should Cuse be able to add millions to the endowment fund and the NCAA to add billions to whom ???

 

[gmoney44]

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.

Colleges with their tax exempt status is a total joke also. No way they should have billions in endowments and be labeled tax exempt. Meanwhile tuition continues to rise much faster than inflation. Total BS

 

[newmexicuse]

Colleges with their tax exempt status is a total joke also. No way they should have billions in endowments and be labeled tax exempt. Meanwhile tuition continues to rise much faster than inflation. Total BS

Totally agree, donations to colleges with over a certain amount in endowments ($ 100 M ?) should not be tax exempt. Great point !!! Not only that, but those colleges that are mega wealthy (to be defined) should not be tax exempt themselves.

 

[althea]

Colleges with their tax exempt status is a total joke also. No way they should have billions in endowments and be labeled tax exempt. Meanwhile tuition continues to rise much faster than inflation. Total BS

I have made similar comments that these colleges with massive endowments have essentially become hedge funds that also run schools on the side. Of course I was told I didn’t know what I was talking about by a very influential poster. It’s an exaggeration, but it’s true.

 

[ClamOtto]

Totally agree, donations to colleges with over a certain amount in endowments ($ 100 M ?) should not be tax exempt. Great point !!! Not only that, but those colleges that are mega wealthy (to be defined) should not be tax exempt themselves.

Don't want to get off on a tangent so feel free to delete, but the net price of college (how much the average student pays after financial aid) has barely budged over the past 15-20, especially at public colleges, and has actually fallen over the past 3 years. Colleges with endowments of $500,000 or more per student (which isn't that many but includes the wealthiest of the wealthy) now have to pay a 1.4% tax on endowment income. If you ask me, the biggest break universities get is the property tax exemption, which kills towns like Syracuse where most of the land is owned by colleges (and other nonprofits). But if we eliminated all tax exemptions for colleges and universities, we would not like the results...

 

[Orangezoo]

Don't want to get off on a tangent so feel free to delete, but the net price of college (how much the average student pays after financial aid) has barely budged over the past 15-20, especially at public colleges, and has actually fallen over the past 3 years. Colleges with endowments of $500,000 or more per student (which isn't that many but includes the wealthiest of the wealthy) now have to pay a 1.4% tax on endowment income. If you ask me, the biggest break universities get is the property tax exemption, which kills towns like Syracuse where most of the land is owned by colleges (and other nonprofits). But if we eliminated all tax exemptions for colleges and universities, we would not like the results...

This is the issue. That cost is passed directly down and would make college even more exclusive and expensive. Increased costs to everyone.

Ultimately I expect professional certification and related coursework will continue to grow and be an alternative to 4 yr degrees but it's a very slow transition and is very industry specific.

 

[cto]

Colleges with their tax exempt status is a total joke also. No way they should have billions in endowments and be labeled tax exempt. Meanwhile tuition continues to rise much faster than inflation. Total BS

Some people on this forum have zero idea of what an endowment is ... or what it is used for.

Colleges (and other non-profits, such as churches, hospitals and museums) need endowments to help cover expenses that are not paid for with operating income. At Syracuse, for example, much of its scholarship aid is paid out of its endowment. At the moment, my church is financing a large necessary capital repair project out of its endowment, and many non-profit performing arts organizations (such as orchestras and regional theatres) needed to use their endowments to get through the pandemic when they had zero operating income.

Endowments are vitally necessary for non-profit organizations. They are not some evil ogre. They (and the interest/dividends they generate) are vital to the health and survival of non-profits.

 

[ClamOtto]

Some people on this forum have zero idea of what an endowment is ... and what it is used for.

Colleges (and other non-profits, such as churches, hospitals and museums) need endowments to help cover expenses that are not paid for with operating income. At Syracuse, for example, much of its scholarship aid is paid for out of its endowment. At the moment, my church is financing a large necessary repair project out of its endowment, and many non-profit performing arts organizations (such as orchestras and regional theatres) needed to use their endowments to get through the pandemic when they had zero operating income.

Endowments are vitally necessary for non-profit organizations. They are not some evil ogre. They (and the interest/dividends they generate) are vital to the health and survival of non-profits.

Yes, plus the fact that not all endowment income can be spent for whatever the university wants. I understand how people get upset that universities with huge endowments don't make college free for everyone, but if the donor says the income can only be spent on, say, planting tulips, then the university can't spend it on financial aid. Money is fungible to a degree, but it depends what the donor has restricted the endowment income for.

 

[Newhouser]

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.

I'm sure the players think it's fine.

 

[OrlandoCuse]

Colleges with their tax exempt status is a total joke also. No way they should have billions in endowments and be labeled tax exempt. Meanwhile tuition continues to rise much faster than inflation. Total BS

If that irks you, wait until you find out about churches and religious organizations…..

 

[Eric15]

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.

Well said. This is a great article from National Affairs about how the tax code as it currently is written basically facilitates parents buying access for their kids, and it's subsidized by taxpayers.

Payoff-based College Admissions

Elite universities present themselves as bastions of meritocracy. But they routinely offer the children and grandchildren of major donors an easy path to admission, even when those students wouldn't otherwise qualify. Worse yet, the donations that op...

www.nationalaffairs.com

"As many are aware, wealthy parents can donate large sums to elite universities and significantly raise the odds that their child will be admitted. At Harvard, being connected to a wealthy donor boosts an applicant's chances of admission by a factor of nine. At Duke in recent years, up to 5% of the student body owed its admission to connections to deep-pocketed donors. Between 2013 and 2019, the state-supported University of California system admitted at least 60 students (and probably well over 400) due to family connections. As state auditors put it, "under normal circumstances" these applicants would otherwise have had "virtually no chance of admission."

This is all unfolding at colleges that avow themselves bastions of equal opportunity and access. These same institutions are all too content to sell seats to the wealthy and connected and to reap the rewards. In so doing, even private universities are not acting as private actors making private decisions; their actions are effectively subsidized by the federal tax code.

As long as there's no explicit quid pro quo agreement between family and university (and these things are done via nods and winks), the IRS turns a blind eye to wealthy families claiming the charitable-giving deduction for the "gifts" that lead to their children's admission. Given the incomes and tax situations of those making these contributions, taxpayers can wind up paying up to 50 cents on the dollar of any check a deep-pocketed donor cuts to purchase a child's admission."

 

[Sbucketball]

I'm sure the players think it's fine.

Of course they do. There's not many people out there who don't want money. I was stating what I understood to be the poster's point.

This feels like an unsustainable gold rush. The players who happened to be college age now hit the jackpot. If they're smart with their money they'll be off to an incredible start in life.

 

[UpstateSM]

Just don’t pay taxes

 

[gmoney44]

Some people on this forum have zero idea of what an endowment is ... or what it is used for.

Colleges (and other non-profits, such as churches, hospitals and museums) need endowments to help cover expenses that are not paid for with operating income. At Syracuse, for example, much of its scholarship aid is paid for out of its endowment. At the moment, my church is financing a large necessary capital repair project out of its endowment, and many non-profit performing arts organizations (such as orchestras and regional theatres) needed to use their endowments to get through the pandemic when they had zero operating income.

Endowments are vitally necessary for non-profit organizations. They are not some evil ogre. They (and the interest/dividends they generate) are vital to the health and survival of non-profits.

I don’t see why it’s necessary to carry a 2 billion endowment for an institution to make “capital repairs.”

 

[ClamOtto]

I don’t see why it’s necessary to carry a 2 billion endowment for an institution to make “capital repairs.”

Another common misperception about endowments is that they represent money available to spend. Universities are legally required to keep the original amount of the gift intact as best they can. That usually means they can spend 4-5% of the value per year without running afoul of state laws. For example, SU's endowment is about $1.8 billion, which seems like a lot of money. But if they use 5% of that each year for operations, that's $90 million. Still a lot of money, but a far cry from $1.8 billion. SU has around 15,000 undergrads, so even if they wanted to spend the entire $90 million on financial aid (which they can't), it would be $6,000 per student - not even 10% of tuition.

 

[gmoney44]

Another common misperception about endowments is that they represent money available to spend. Universities are legally required to keep the original amount of the gift intact as best they can. That usually means they can spend 4-5% of the value per year without running afoul of state laws. For example, SU's endowment is about $1.8 billion, which seems like a lot of money. But if they use 5% of that each year for operations, that's $90 million. Still a lot of money, but a far cry from $1.8 billion. SU has around 15,000 undergrads, so even if they wanted to spend the entire $90 million on financial aid (which they can't), it would be $6,000 per student - not even 10% of tuition.

My original post was that colleges with huge endowments shouldn’t be tax exempt. That goes for churches, charities or anything else. If you are sitting on unspent and ever growing mountains of money you shouldn’t be tax exempt in my opinion.

 

[althea]

Some people on this forum have zero idea of what an endowment is ... or what it is used for.

Colleges (and other non-profits, such as churches, hospitals and museums) need endowments to help cover expenses that are not paid for with operating income. At Syracuse, for example, much of its scholarship aid is paid for out of its endowment. At the moment, my church is financing a large necessary capital repair project out of its endowment, and many non-profit performing arts organizations (such as orchestras and regional theatres) needed to use their endowments to get through the pandemic when they had zero operating income.

Endowments are vitally necessary for non-profit organizations. They are not some evil ogre. They (and the interest/dividends they generate) are vital to the health and survival of non-profits.

I think the problem is not so much with a local church but with schools like Harvard, Stanford etc. that have many billions of dollars they are sitting on.

 

[ClamOtto]

My original post was that colleges with huge endowments shouldn’t be tax exempt. That goes for churches, charities or anything else. If you are sitting on unspent and ever growing mountains of money you shouldn’t be tax exempt in my opinion.

Fair enough. My point is that they really don't have much choice about sitting on billions of dollars. If people donated billions of dollars and specified that it's for the endowment, then the school has to sit on billions of dollars and only spend 4-5% per year. They could certainly ask people to stop donating to the endowment, but there's not much they can do about the money that's already in there.

 

[kcsu]

Some people on this forum have zero idea of what an endowment is ... or what it is used for.

Colleges (and other non-profits, such as churches, hospitals and museums) need endowments to help cover expenses that are not paid for with operating income. At Syracuse, for example, much of its scholarship aid is paid for out of its endowment. At the moment, my church is financing a large necessary capital repair project out of its endowment, and many non-profit performing arts organizations (such as orchestras and regional theatres) needed to use their endowments to get through the pandemic when they had zero operating income.

Endowments are vitally necessary for non-profit organizations. They are not some evil ogre. They (and the interest/dividends they generate) are vital to the health and survival of non-profits.

Had dinner last night with an econ professor from Georgetown. We were discussing the need for legislative change relating to endowment usage. Specifically leeway to increase, allow funds to be used for students to help offset the rise in tuition cost.
Higher education is facing some serious challenges. At the core is a shift in the valuation model. Simply put many are starting to question the value of a college education given the extreme cost.

 

[ClamOtto]

Had dinner last night with an econ professor from Georgetown. We were discussing the need for legislative change relating to endowment usage. Specifically leeway to increase, allow funds to be used for students to help offset the rise in tuition cost.
Higher education is facing some serious challenges. At the core is a shift in the valuation model. Simply put many are starting to question the value of a college education given the extreme cost.

To bring it back full circle to sports and NIL, this is one reason schools like SU have to be very concerned about the current state of college athletics. Big components of the "value proposition" at many schools are the social aspects and reputational benefits of the school's name. Sports can be a big part of that. If the whole model falls apart, or if we end up with basically 64 or so "major league" schools and the rest on the outside looking in, it becomes a lot harder to make the case to students that it's worth the cost, especially at expensive private schools. Binghamton or New Paltz start looking a lot better, given the huge difference in cost. Also why it's so important for private schools to be able to aggressively discount their prices. There just aren't that many families who can - or are willing to - pay the full sticker price to go to SU.

 

[Brooky03]

To bring it back full circle to sports and NIL, this is one reason schools like SU have to be very concerned about the current state of college athletics. Big components of the "value proposition" at many schools are the social aspects and reputational benefits of the school's name. Sports can be a big part of that. If the whole model falls apart, or if we end up with basically 64 or so "major league" schools and the rest on the outside looking in, it becomes a lot harder to make the case to students that it's worth the cost, especially at expensive private schools. Binghamton or New Paltz start looking a lot better, given the huge difference in cost. Also why it's so important for private schools to be able to aggressively discount their prices. There just aren't that many families who can - or are willing to - pay the full sticker price to go to SU.

Syracuse would, in all likelihood, be in that group of 64.

 

[gmoney44]

I have made similar comments that these colleges with massive endowments have essentially become hedge funds that also run schools on the side. Of course I was told I didn’t know what I was talking about by a very influential poster. It’s an exaggeration, but it’s true.

I got the lecture from the ivory tower too. Us poor peasants couldn’t possibly comprehend why these colleges need those billions.