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Bipartisan legislation introduced that would remove tax write-offs for NIL collectives
Posted on 9/29/22 at 9:47 am
Posted on 9/29/22 at 9:47 am
quote:
Yesterday, Senator John Thune (R-South Dakota) and Senator Ben Cardin (D-Maryland) introduced a bill that would block boosters from receiving tax deductions for NIL contributions.
They believe these payments are private expenses and shouldn't be characterized as charitable contributions.
This bill would likely have the biggest impact on NIL collectives, many of which have been promising donors that they will be able to write-off contributions.
via Darren Heitner on Twitter
12
Posted on 9/29/22 at 9:49 am to paperwasp
Good
Posted on 9/29/22 at 9:52 am to nes2010
Not good.
This is an avenue to remove all "income" write-offs for use of name or likeness in other sectors.
If will effectively kill all NIL advertising above and beyond college athletics, and will eventually be used to destroy commercial speech.
NEVER open the door for bullshite because you think it will help you in the short term.
This is an avenue to remove all "income" write-offs for use of name or likeness in other sectors.
If will effectively kill all NIL advertising above and beyond college athletics, and will eventually be used to destroy commercial speech.
NEVER open the door for bullshite because you think it will help you in the short term.
Posted on 9/29/22 at 9:55 am to KaiserSoze99
quote:
It will effectively kill all NIL advertising above and beyond college athletics, and will eventually be used to destroy commercial speech.
I honestly am not following what you're suggesting, but would like to.
Please expound on this.
Posted on 9/29/22 at 9:56 am to paperwasp
No organization should be exempt from taxes.
Posted on 9/29/22 at 10:00 am to paperwasp
They are treating NIL Collectives just as they treated donations for tickets......the entire purpose of the yearly donation is the right to receive tickets, therefore it is a transaction for service/goods and not a pure gift and you don't get to take a tax exemption for an exchange transaction.
NIL donations are specifically for use in transactional purposes and therefore being labeled as an exchange transaction that is not eligible to be used as a write off.
The biggest difference here is that the donation for ticket situation was basically just an IRS ruling, not congressional legislation like this. It was much more grey and the IRS basically refused to follow up or clarify it after the fact because they had no desire to get into the weeds on it - but it was clear enough and scary enough that basically every athletic department/association decided it wasn't worth messing with anymore. By actually passing a detailed this is not ok, this is not ok, this is not ok bill it actually makes it easier for NILs to work around those rules in whatever way they come up with like businesses and lawyers have been doing since the days of the Romans.
EDIT : This is in response to individuals donating to a collective. It appears the legislation discussed in the OP is actually geared towards the collective itself attempting to be covered for all payments as non-business activities that fall under non-profit status.
NIL donations are specifically for use in transactional purposes and therefore being labeled as an exchange transaction that is not eligible to be used as a write off.
The biggest difference here is that the donation for ticket situation was basically just an IRS ruling, not congressional legislation like this. It was much more grey and the IRS basically refused to follow up or clarify it after the fact because they had no desire to get into the weeds on it - but it was clear enough and scary enough that basically every athletic department/association decided it wasn't worth messing with anymore. By actually passing a detailed this is not ok, this is not ok, this is not ok bill it actually makes it easier for NILs to work around those rules in whatever way they come up with like businesses and lawyers have been doing since the days of the Romans.
EDIT : This is in response to individuals donating to a collective. It appears the legislation discussed in the OP is actually geared towards the collective itself attempting to be covered for all payments as non-business activities that fall under non-profit status.
This post was edited on 9/29/22 at 10:12 am
Posted on 9/29/22 at 10:03 am to SummerOfGeorge
quote:
NIL donations are specifically for use in transactional purposes and therefore being labeled as an exchange transaction that is not eligible to be used as a write off.
This. The fact that NIL "donations" we're a trax write off the begin with is a bit ridiculous.
Posted on 9/29/22 at 10:06 am to paperwasp
Realize the limits of this. This applies only to contributions to collectives.
1. You as an individual contribute money to a collective and you would not get to deduct that amount as a charitable contribution (actually not sure you could under existing law anyway).
2. Your business hires a college athlete to promote your brand. Your business is entitled to a business deduction (within the extremely vague limits of "ordinary and necessary"). No different than Nike getting to deduct what they pay LeBron James for brand endorsements.
1. You as an individual contribute money to a collective and you would not get to deduct that amount as a charitable contribution (actually not sure you could under existing law anyway).
2. Your business hires a college athlete to promote your brand. Your business is entitled to a business deduction (within the extremely vague limits of "ordinary and necessary"). No different than Nike getting to deduct what they pay LeBron James for brand endorsements.
This post was edited on 9/29/22 at 10:08 am
Posted on 9/29/22 at 10:06 am to paperwasp
The reason why NIL and NIL collectives exist is because the Supreme Court looked at the situation as if it were a business. NIL collectives exist within the context of business transactions, not charity, so I think it makes sense to remove the tax deductions allotted for such "donations".
Posted on 9/29/22 at 10:07 am to OleVaught14
I actually saw that Tennessee's NIL Collective is creating some sort of non-profit specific corporation/sector for legitimate non-profit activities. I would imagine they are probing to get ahead of things like this, but in reality they'll just end up having to have donors clarify what % of their donation goes to NIL and what % goes to the not for profit work.
Posted on 9/29/22 at 10:07 am to SummerOfGeorge
quote:
it actually makes it easier for NILs to work around those rules in whatever way they come up with
In particular (from that snippet), the qualifying verbiage "by reason of their status as athletes" seems like a way for an attorney to shoehorn in an argument.
These collectives have been overwhelmingly vetted, and I'm sure the cat-and-mouse game will continue.
ETA: Apparently this is a two-page bill, and I haven't seen how the whole thing is actually worded.
This post was edited on 9/29/22 at 10:33 am
Posted on 9/29/22 at 10:08 am to paperwasp
If your collectives are filed as a “nonprofit” than you are falling behind
Posted on 9/29/22 at 10:08 am to paperwasp
Good
Posted on 9/29/22 at 10:09 am to KaiserSoze99
quote:
Not good.
This is an avenue to remove all "income" write-offs for use of name or likeness in other sectors.
If will effectively kill all NIL advertising above and beyond college athletics, and will eventually be used to destroy commercial speech.
NEVER open the door for bullshite because you think it will help you in the short term.
NIL payments are nothing more than paying a celebrity to advertise your product, or for paying for their autograph memorabilia. Why should it destroy commericial speech? If I have a car dealership and want to pay Bryce Young to appear in an advertisement, it's still tax deductible...but as a business expense, not a charitible donation.
Posted on 9/29/22 at 10:10 am to CelticTiger
quote:
Realize the limits of this. This applies only to contributions to collectives.
1. You as an individual contribute money to a collective and you would not get to deduct that amount as a charitable contribution (actually not sure you could under existing law anyway).
2. Your business hires a college athlete to promote your brand. Your business is entitled to a business deduction (within the extremely vague limits of "ordinary and necessary"). No different than Nike getting to deduct what they pay LeBron James for brand endorsements.
Good point, I didn't read closely. Not sure how anyone could argue against this, nor how anyone convinced themselves in the first place that NIL Collectives would qualify for non-profit status anyway. My guess is the IRS just hasn't gotten around to issuing any rulings on them and that this legislation is because either they wanted to go ahead and squash this now or the IRS asked them to do something about it on a broad level as these things continued to grow and expand.
This post was edited on 9/29/22 at 10:11 am
Posted on 9/29/22 at 10:15 am to CelticTiger
quote:Yes. If you are a business paying for use of NIL, that's deductible as a business expense.
Realize the limits of this. This applies only to contributions to collectives.
1. You as an individual contribute money to a collective and you would not get to deduct that amount as a charitable contribution (actually not sure you could under existing law anyway).
2. Your business hires a college athlete to promote your brand. Your business is entitled to a business deduction (within the extremely vague limits of "ordinary and necessary"). No different than Nike getting to deduct what they pay LeBron James for brand endorsements.
NIL collectives are not charitable organizations, nor are they pursuing a common business venture for profit, so "donations" or other payments into the collective should not be tax deductible.
If I hired an athlete to promote my business, I could count that as a business expense, but the money I give to TexAgs for their Stacked interviews is not deductible.
Posted on 9/29/22 at 10:15 am to paperwasp
That actually makes sense. Im fine with that.
Posted on 9/29/22 at 10:16 am to paperwasp
why the hell would NIL donations be considered charitable?
Posted on 9/29/22 at 10:16 am to SummerOfGeorge
quote:
I actually saw that Tennessee's NIL Collective is creating some sort of non-profit specific corporation/sector for legitimate non-profit activities.
From the comments, in regards to Clemson's collective structure.
quote:
Posted on 9/29/22 at 10:18 am to notsince98
quote:
why the hell would NIL donations be considered charitable?
quote:
One of the more creative types of NIL collectives is the establishment of a tax-exempt NIL collective, which operates as a 501(c)(3) public charity. This entity type allows for a greater outreach to alumni and donors who want to participate in the NIL process, but do not have the individual financial resources to hire a student athlete for their business marketing campaign or brand promotion. The tax-exempt organization provides a charitable contribution tax deduction to individuals or companies that would like to support the NIL collective’s efforts.
quote:
The tax-exempt collective will have a charitable mission and will contract with student athletes to help further that mission. This allows boosters of the college or university to support student athletes and get a charitable contribution tax deduction at the same time.
However, donors and student athletes should be careful when working with these not-for-profit NIL collectives. While many obtain tax-exempt status from the Internal Revenue Service (IRS), numerous state attorneys general (AGs) are looking into the entities due to skepticism that the organization’s primary purpose is charitable. Since AGs generally have authority over public charities operating in their state, they have great latitude to require the collective to change how it functions, take over its operations or simply change or revoke the tax-exempt status. If the tax-exempt status of a not-for-profit collective is revoked, this may negatively impact the donors’ charitable contribution tax deduction. It will also limit the NIL collective’s ability to honor its commitments to the student athletes as funding would likely be greatly reduced.
Baker Tilly - NIL
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