November 30, 2022

Volume XII, Number 334

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November 30, 2022

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November 29, 2022

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November 28, 2022

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Proposed Senate Bill Would Deny Deductions for NIL Contributions

On September 28, 2022, U.S. Senators Ben Cardin (D-Md.), a member of the Senate Finance Subcommittee on Taxation and Internal Revenue Service (IRS) Oversight, and John Thune (R-S.D.), ranking member of the Subcommittee on Taxation and IRS Oversight, introduced the Athlete Opportunity and Taxpayer Integrity Act, which seeks to deny charitable deductions for any contribution used by the donee to compensate college athletes for the use of their name, image, or likeness (“NIL”) by reason of their status as athletes.

One entity type that is impacted by the Athlete Opportunity and Taxpayer Integrity Act are “NIL collectives” that have been established as 501(c)(3) organizations.  These types of NIL collectives have been used to allow donors to make tax deductible contributions that are then used to fund NIL opportunities for college athletes, for example, by having a college athlete provide services to a separate charity in exchange for payment from the NIL collective.  A press release from Senator Cardin noted that “[s]uch activity is inconsistent with the intended purpose of the charitable tax deduction, and it forces taxpayers to subsidize the potential recruitment of – or payment to – college athletes based on their NIL status.”

Notably, the Opportunity and Taxpayer Integrity Act would only apply to charitable deductions.  A person engaged in a trade or business would still be able to deduct payments to college athletes for the use of their name, image, or likeness if such payments qualify as ordinary and necessary business expenses.

Although it is not clear at this time whether the Opportunity and Taxpayer Integrity Act will pass, it does indicate increased scrutiny over nonprofit NIL collectives and possibly other NIL arrangements. 

© 2022 Varnum LLPNational Law Review, Volume XII, Number 279
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About this Author

Richard T. Hewlett Litigation Attorney Varnum
Partner

Rich is a partner on the Litigation and Trial Services Team where he focuses on construction law and litigation, business litigation and commercial matters, contracts and sports law. Rich has extensive experience with all facets of construction law and has represented owners, construction managers, subcontractors/suppliers and design professionals. Rich handles a wide range of construction matters, including claims related to delays, extra work, productivity impact, defects, construction lien and bond claims, and assists clients with a variety of business and contract-related matters and...

248-567-7824
Shawn A. Strand Tax Attorney Varnum Law Firm
Partner

Shawn is an experienced tax attorney with a focus on corporate and partnership taxation issues. He advises clients on mergers and acquisitions, tax-exempt entities, individual tax collection matters and taxation of real estate transactions, including complex Section 1031 exchanges.

Shawn also advises clients regarding federal income tax planning and entity structuring. He works with individuals on the formation and operation of family offices.

734-372-2931
Jessica E. Visser Grand Rapids Corporate Attorney Varnum
Partner

Jessica E. VIsser is a member of the Corporate Practice Team and co-chair of Varnum's Name, Image and Likeness (NIL) Practice. As former associate general counsel for a major university, Jessica regularly negotiated significant contracts including spearheading the disposition and lease of university property and supporting a multimillion-dollar concession agreement for the university’s parking system. She counseled the university athletic department on NIL matters, NCAA compliance, and strategic negotiation of coach contracts. She is experienced in Title IX and...

616-336-6943
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