re: The Athletic on A&M's recruiting spending spree

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On Saturday, as the Texas A&M donors gathered to learn about the new facilities, former Oklahoma coach Barry Switzer announced a Norman-based NIL collective called 1Oklahoma that will operate as a non-profit and pay Oklahoma athletes for doing work for other non-profits. According to a release announcing the collective, Oklahoma athletes can make between $40,000 and $50,000 a year partnering with 1Oklahoma.

Investors in The Fund at Texas A&M don’t understand why investors in other collectives feel the need to advertise those collectives. None in the Texas A&M-adjacent group would speak on the record, though several shared working details of the operation with The Athletic. As far as publicity, they feel word-of-mouth between recruits and players will be plenty to ensure the people they’ll work with know what is available.

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With various state NIL laws going into effect on July 1, 2021, the investors behind The Fund began designing the structure of the organization in May 2021. Originally, the plan was to operate almost strictly as an apparel/memorabilia company, making T-shirts and other player-branded items that could be sold to an adoring fan base. That didn’t last long. Eventually, the backers of The Fund came to the same conclusion that other for-profit collectives have. The most efficient way to handle players — and the easiest way to guarantee an amount of money — is to buy the players’ NIL rights entirely and then act as a marketing agency, making deals on behalf of the players and then using the proceeds from those deals to recoup the marketing guarantees made in the players’ contracts.

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The Oklahoma fund described above operates as a 501(c)(3) organization. So does a collective attached to Ohio State. Meanwhile, some who have organized their collectives as for-profit LLCs have expressed reservations about the non-profit model. They aren’t entirely sure the IRS ultimately will view such organizations as charitable entities. The LLC operators feel their investors can write off donations as business expenses because players can be hired to promote the investors’ businesses. Another possibility is that if a collective operates at a loss, it could provide a Schedule K-1 form to investors who then could claim their portion of the loss on their taxes.

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The hope in College Station is that The Fund will generate enough money in promotional deals to cover any guarantees. But those investors, who didn’t get rich by being dumb, aren’t naive. “It’s going to need to be refilled every year,” said one person who has invested in The Fund and given to the recent capital campaign. “I’m not sure how many of these people understand that yet.”

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Organizers of The Fund also worry about how the players will handle the money. That’s why several of the contracts are set up so that a substantial portion of the guarantee will be paid out in April 2023. Why? Because that’s when taxes are due, and it would ensure the player would have enough cash on hand to pay the IRS. There was some trepidation about providing a payment so close to the May 1 deadline to enter the NCAA transfer portal and play somewhere else the following season, but ultimately the collective decided helping to keep its favorite team’s players on Uncle Sam’s good side superseded any concerns about those players transferring.

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