Senate bill would deny charitable donation tax deductions for NIL

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 (RS.D. ), a senior member of the IRS Tax and Oversight Subcommittee, introduced the Athlete 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”) for the reason of their status as athletes.

One type of entity that is impacted by the Athlete and Taxpayer Opportunity 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 which are then used to fund NIL opportunities for varsity athletes, for example, requesting a varsity athlete to provide services to an organization separate charity in return for payment from the NIL collective. . A press release from Senator Cardin noted that “[s]This activity is inconsistent with the intended purpose of the charitable tax deduction and requires taxpayers to subsidize the potential recruitment of varsity athletes – or their payment – ​​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 are considered ordinary and necessary business expenses.

While it is unclear at this time whether the Opportunity and Taxpayer Integrity Act will pass, it does indicate increased scrutiny of non-profit NIL collectives and possibly other NIL arrangements.

© 2022 Varnum LLPNational Law Review, Volume XII, Number 279

Norman D. Briggs