Aside from the obvious reasons of supporting student-athletes, one benefit of donating to NIL collectives was that the donation was thought to be a tax write-off.
Now, the IRS has made it clear that NIL collectives aren’t tax exempt.
The IRS Chief Counsel released a 12-page memo detailing the reasoning behind this clarification.
Essentially, it boils down to the fact that NIL collectives provide a greater private benefit than public benefit.
This isn’t to say every NIL collective will be hurt from this announcement — only the ones that set themselves up as 501(c)(3) charitable organizations, as that is clearly not the case. Many NIL collectives likely foresaw this happening from the beginning.
But donors who were expecting to tag these donations as write-offs won’t be happy, and there’s the potential for NIL collectives to disband if they’re incapable of meeting the required taxation.
“I am not surprised at all by this news,” Corey Staniscia, CEO of the Fowler Ave Collective promoting USF, said to Sports Illustrated. “These are not charitable organizations. These are service contracts and rights of publicity commercial organizations. It’s one thing to partner with a 501(c)(3), it’s another to claim to actually be a 501(c)(3). I have been asked more times than I can count why Fowler Ave Collective is not a nonprofit. It was always too risky.”