IRS getting involved in the NIL?

#1
Orange defense

Orange defense

Blood runneth orange in my veins
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#1
There’s Tax man problems.

Aggieland was stunned when Texas A&M’s 12th Man+ fund, one of the biggest NIL fundraising operations in the country, was abruptly shut down for legal purposes.
The problems started when the IRS sent out a memo in early June stating that NIL Collectives can’t qualify as 501©(3) nonprofits, and thus should not enjoy tax-exempt status, which is exactly what the 12th Man+ fund had been doing.

There’s playing time problems.

A study of what happens to portal kids which is driven by NIL money shows
72% of portal transfers play few snaps than their previous school.
37% did not start a game.
G5 to P5 transfers rarely get the same snap time as they did with G-5 schools.
Higher profile HS recruits are growing in numbers at G5 schools due to lack of available spots on P5 rosters.
Post season coaching changes can severely handicap new coaches who miss the portal. Scholarship players leave and the new coach can see a good team turn bad quickly.
A small study of 104 G5 athletes playing 500 snaps or more had only 13 match snaps going to P5. The average had their snaps by over half.
Most G5 schools are working with limited NIL money. Tulane mentioned as having a $1.5 million war chest.
Biggest P5 is Texas with $19.9 million
UCF $2.5. Vandy $2.4. Cincy $1.9. Houston. $1.5. SMU. $2.1. Boise $2.0


With these numbers only NIL potential makes the poor odds worth it.
Silverfield seems to looking pretty savvy finding lower G5 transfers.

Anybody know what the 901 Fund war chest totals?
 
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#2
#2
NIL Collectives Generally

NIL collectives are often established by supporters of university athletic programs, but they are legally separate from the university and its athletic departments. These organizations pool donations and develop paid NIL opportunities for student-athletes of the university they support, often in partnership with one or more for-profit businesses or in the case of a 501(c)(3) collective with one or more charities. NIL collectives that have received tax-exempt status from the IRS under Section 501(c)(3) have qualified for exempt status due to these relationships with partnered charities. Their exempt purpose, as required under Section 501(c)(3), is typically promoting and supporting other 501(c)(3) charitable organizations. If an NIL collective is not tax-exempt, then contributions to it would not be tax deductible for the donor and income generated by the collectives would be taxable.

NIL collectives that are exempt under Section 501(c)(3) carry out this charitable purpose by identifying and facilitating opportunities for the student-athletes that will ultimately benefit the partnered charities through increased visibility for particular events or increased fundraising. These NIL opportunities often include promoting the collective or its partnered charity through social media posts, attending fundraising events, or autographing items to be sold by a partnered charity, often at no cost to the charity. The NIL collective then pays the student-athlete for participating in the charitable promotion.

Qualifying for Tax-Exempt Status

To qualify for tax-exempt status with the IRS under Section 501(c)(3), an organization must be “organized and operated” exclusively for “exempt purposes,” such as religious, charitable, scientific, literary, or educational purposes.

To be operated exclusively for exempt purposes, the organization must engage primarily in activities that accomplish those purposes. This means the organization must primarily serve a public interest rather than a private interest. If the organization serves both public and private interests, the private benefit must be both qualitatively and quantitatively incidental to accomplishing the organization’s exempt purposes. The private benefit is considered “qualitatively incidental” if it is necessary to or a byproduct of the exempt activities, and the benefit is “quantitatively incidental” if the amount is insubstantial compared to the public benefit.


The last paragraph is the important part here.
 
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#5
#5
pimo1 said:
NIL Collectives Generally

NIL collectives are often established by supporters of university athletic programs, but they are legally separate from the university and its athletic departments. These organizations pool donations and develop paid NIL opportunities for student-athletes of the university they support, often in partnership with one or more for-profit businesses or in the case of a 501(c)(3) collective with one or more charities. NIL collectives that have received tax-exempt status from the IRS under Section 501(c)(3) have qualified for exempt status due to these relationships with partnered charities. Their exempt purpose, as required under Section 501(c)(3), is typically promoting and supporting other 501(c)(3) charitable organizations. If an NIL collective is not tax-exempt, then contributions to it would not be tax deductible for the donor and income generated by the collectives would be taxable.

NIL collectives that are exempt under Section 501(c)(3) carry out this charitable purpose by identifying and facilitating opportunities for the student-athletes that will ultimately benefit the partnered charities through increased visibility for particular events or increased fundraising. These NIL opportunities often include promoting the collective or its partnered charity through social media posts, attending fundraising events, or autographing items to be sold by a partnered charity, often at no cost to the charity. The NIL collective then pays the student-athlete for participating in the charitable promotion.

Qualifying for Tax-Exempt Status

To qualify for tax-exempt status with the IRS under Section 501(c)(3), an organization must be “organized and operated” exclusively for “exempt purposes,” such as religious, charitable, scientific, literary, or educational purposes.

To be operated exclusively for exempt purposes, the organization must engage primarily in activities that accomplish those purposes. This means the organization must primarily serve a public interest rather than a private interest. If the organization serves both public and private interests, the private benefit must be both qualitatively and quantitatively incidental to accomplishing the organization’s exempt purposes. The private benefit is considered “qualitatively incidental” if it is necessary to or a byproduct of the exempt activities, and the benefit is “quantitatively incidental” if the amount is insubstantial compared to the public benefit.


The last paragraph is the important part here.
Click to expand...
Well, that certainly seems like it could be problematic.
 
#7
#7
VolinMichigan said:
Wait til these kids making big NIL money figure out that earning income means you have to pay taxes. I’m all for paying players but there’s going to be some harsh lessons in financial literacy for some of these guys.
Click to expand...

When I first clicked the link I thought this was going to be the actual topic. Schools are going to have to go the way of the NBA and NFL and have a "rookie bootcamp" where advisors come in and teach these guys about financial decisions, taxes, etc........especially because I bet most of these 18, 19, 20 year olds have never even filed taxes.....April is going to be a wake up call for some.
 
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#8
#8
Illinoisvolfan2 said:
Well, that certainly seems like it could be problematic.
Click to expand...
Spyre will be fine they have good lawyers.. they will just pay their taxes and move on. Spyre is not just a collective they are literally the blueprint and are already on top of this topic almost a year ago

www.on3.com

Tennessee-driven Spyre Sports to launch NIL collective trade association

Spyre Sports is setting the framework to provide a unified voice in NIL with plans to launch a collective trade association.
www.on3.com www.on3.com
 
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#10
#10
Orange defense said:
There’s Tax man problems.

Aggieland was stunned when Texas A&M’s 12th Man+ fund, one of the biggest NIL fundraising operations in the country, was abruptly shut down for legal purposes.
The problems started when the IRS sent out a memo in early June stating that NIL Collectives can’t qualify as 501©(3) nonprofits, and thus should not enjoy tax-exempt status, which is exactly what the 12th Man+ fund had been doing.

There’s playing time problems.

A study of what happens to portal kids which is driven by NIL money shows
72% of portal transfers play few snaps than their previous school.
37% did not start a game.
G5 to P5 transfers rarely get the same snap time as they did with G-5 schools.
Higher profile HS recruits are growing in numbers at G5 schools due to lack of available spots on P5 rosters.
Post season coaching changes can severely handicap new coaches who miss the portal. Scholarship players leave and the new coach can see a good team turn bad quickly.
A small study of 104 G5 athletes playing 500 snaps or more had only 13 match snaps going to P5. The average had their snaps by over half.
Most G5 schools are working with limited NIL money. Tulane mentioned as having a $1.5 million war chest.
Biggest P5 is Texas with $19.9 million
UCF $2.5. Vandy $2.4. Cincy $1.9. Houston. $1.5. SMU. $2.1. Boise $2.0


With these numbers only NIL potential makes the poor odds worth it.
Silverfield seems to looking pretty savvy finding lower G5 transfers.

Anybody know what the 901 Fund war chest totals?
Click to expand...
SMU paid better than that in the 80s. What happened?
 
#11
#11
VolinMichigan said:
Wait til these kids making big NIL money figure out that earning income means you have to pay taxes. I’m all for paying players but there’s going to be some harsh lessons in financial literacy for some of these guys.
Click to expand...
Why do you assume they don't know this already? What a strange assumption. What kind of gross assumptions are you making?
 
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#13
#13
The IRS has been examining the NIL programs for many months. I contributed to ours but never even considered trying to deduct the contribution.

Who knows what will happen but there's always a guy who knows how to steal a Coke from the machine.

www.outkick.com

Texas A&M Kills Controversial NIL Fund, Uses Technicality For Money

Although Texas A&M's 12th Man Foundation is shutting down its 12th Man+ NIL Fund, the money is going to keep flowing through a loophole.
www.outkick.com www.outkick.com
 
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#16
#16
Great recent article in The Athletic about NIL. They did an anonymous survey of high-star players at one of the all-star games. Many of them are hiring agents now to figure out what the deals are and where. The average player is getting offered anywhere from 100-400k per year. One school was offering a player an additional 40k per month before signing day just to be the leader for peer recruiting.
It used to be a huge problem for a player to get mixed up with an agent so early. Now that the genie is out of the bottle, how do they put it back? A new arms race has begun. Look at Tyler Baron? He found a better deal at Louisville after giving Kiffin a commitment. We are lucky to be a big school with devoted fans, otherwise we would be left behind. Many other schools will. Sorry no link, it is behind a paywall.
 
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#17
#17
loosecannon said:
SMU paid better than that in the 80s. What happened?
Click to expand...

Most of their big time boosters were banned from any contact following the scandal or have died in the last 40; years.

I was kinda shocked that they came up with the funds to join the ACC.

They have 0 fan support in the DFW area. Can't even remember the last time I saw anyone wearing any of their swag around town.
 
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#22
#22
volfanhill said:
Why do you assume they don't know this already? What a strange assumption. What kind of gross assumptions are you making?
Click to expand...
It's a pretty safe assumption for Gen Z kids. Go check out your local public high school curriculum. You'd be hard pressed to find any significant lessons on private money management, tax codes, government or basic economics. That stuff was replaced 20 years ago.
 
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#23
#23
loservol said:
That a lot of these kids come from poor backgrounds and/ or never worked for any place of employment.
Click to expand...
You're assuming the university just hands out millions of dollars to 19 year olds and doesn't have some sort of plan in place to handle taxes? Seems like that would be a huge mistake.
 
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