IRS on NIL, this might shake things up a bit

The IRS says donations to NIL cooperatives might not be tax-deductible. This might shake up the landscape a bit.

The new NCAA President is lobbying Congress for their help, I wish him luck there.

Mike Nolan

Why would/should it be tax deductible?

Greg Zimmerman, UNL '75
Overland Park, Kansas

If it’s a legitimate business expense, like a marketing campaign it should be. But if it’s just a rich donor donating money then it’s a different story

I was wondering the same thing. I suppose if it can be considered a business expense that might fly. There are a lot of business expenses that are tax deductible.

John Papenhagen

On 6/10/2023 10:59 AM, Greg Zimmerman via TSSI Lists wrote:

Why would/should it be tax deductible?

Greg Zimmerman, UNL '75
Overland Park, Kansas

A charitable donation obviously has to go to a 501c charity. For a business expense the business will have to demonstrate that there was some kind of service or item received by the business and that it was necessary for the running of the business. Necessity has an extremely loose definition, so almost anything the business does outside of funding obviously personal items like owner’s vacations would qualify. What would likely have to happen is that the athlete will need to appear at some kind of event or do a commercial or something like that. What will not fly is just giving money to an athlete or a consortium like is set up in Lincoln now.

I suspect the IRS will make this one of their things that put a return at high risk of audit.

I think what the IRS is questioning is whether the cooperatives, which may have been set up as 501C organizations, are actually doing ‘charitable’ things with the money donated to them.

‘Amateur’ sports has skirted this line for a long time with payments to Olympic athletes to help them with their living and training expenses. Back in the 1930’s, some foundations were formed to support a few chess players in their quest for international titles, Sammy Reshevsky was one of them.

As far as business payments are concerned, name and image licensing means that the player’s name or image has to be USED for something that benefits the business. An easy example is selling T-shirts with the player’s name or image on it. Paying players to maintain blogs might be a bit harder to justify, but payments where there is NO obvious benefit to the company, in large part because the existence of the relationship is not even known, are even harder to justify as having a business purpose.

This whole NIL thing happened so fast that rules are going to be afterthoughts. That’s called locking the barn door after the horse was stolen.

Yeah well socal media influencers make a lot of money getting views with product placement. There’s got to be a creative way for athletes to do similar.

It’s rare that I find anything to agree with the IRS about but on this I will agree, I hope that they stand their ground on this. NIL is a sham whose only purpose is to pay off athletes and either keep them or entice them to come to your favorite school and play on your team. These athletes are not charity causes and to large extent neither are the athletic departments at the schools where they play.

NIL has, in my mind, really ruined the college sports experience in my mind. With players coming and going or money being thrown around to entice someone I’m losing interest fast. I know of one list member who gave up their season tickets that they’ve had for decades after NU told them that they would have to make a significant donation to keep their seats. I can assure anyone that I will be the next to tell NU thanks but no thanks when they tell me the same thing about the seats I’ve sat in for 30 or so years in the west stadium. I am donating now, and have been since I acquired the seats but I’m not going to increase that donation just to watch what we’ve sat thru for the past 20 years.

I even offered to transfer the seats to my son who is 31 and has much more disposable income than I do and he said absolutely not it’s not at all worth it to me to pay what they would require me to pay to watch what we’ve seen these past many years too. This should be a warning sign to college athletics that the goose that lays the golden eggs can reach the point of little or no interest.

Gary Fead

1 Like

Yeah, but at least social media influencers are something that could vaguely be labeled as advertising, promotion or publicity, even if one might think their influence dubious at best.

But if XYZ Company writes a big check to Enormous University so that Star QB comes or stays, and NOBODY KNOWS ABOUT IT, how is that benefiting XYZ?

I totally understand. I have never had season tickets so that is not at issue with me. I still find myself being less and less interested as the years pass. In my case three things have contributed to that.

  1. The Huskers lack of success over the last 20 years. I know people are all jacked up about the future with Rhule. But people were all jacked up with the news of Frost coming to Lincoln. I am going to have to see it to believe it.

  2. The transfer portal.

  3. NIL.

New NCAA President Charlie Baker agrees with the IRS ruling on NIL cooperatives.