Collegiate athletics is a competitive and popular multibillion dollar business industry. With television rights deals, conference realignment, recruitment, and much more, collegiate athletics garner significant media coverage. One topic receiving significant recent attention is the area of Name, Image, and Likeness (NIL) agreements, which allow student-athletes to financially benefit from their NIL. Because of the growing influence of student-athletes as celebrities in social media and their communities, the attention surrounding NIL is not surprising. NIL opportunities have provided new revenue sources for student-athletes that, in some instances, may reach significant sums according to some media outlet rankings of the highest estimated financial value of student-athlete NIL agreements. Due to the potential tax consequences, student-athletes should exercise appropriate due diligence before entering into NIL agreements. It is crucial to follow relevant IRS and state guidance on how to report and pay taxes on NIL income.

TAS has developed and published educational tax resources for student-athletes on our NIL Get Help page to highlight general information, including federal tax reporting, federal tax withholding, estimated tax payment, and return filing requirements associated with NIL income. I want to bring additional attention to this issue to help educate prospective and current student-athletes and their families regarding important federal tax considerations.

National Collegiate Athletic Association Case Law and NIL Interim Policy Create New Challenges

NIL contracts are a relatively new phenomenon, which may have legal implications on all parties involved. The landscape of collegiate athletics changed on June 21, 2021, when the U.S. Supreme Court ruled in National Collegiate Athletic Association v. Alston that student-athletes could benefit from their NIL. After Alston, the National Collegiate Athletic Association (NCAA) enacted an Interim NIL Policy, many states enacted NIL legislation, and for the first time, student-athletes were able to benefit from their NIL. On October 26, 2022, the NCAA issued new guidance clarifying institutional involvement in enrolled student-athletes’ NIL activities.

With so much activity during its infancy, it did not take long for NIL agreements to present complicated issues, including governing legal authority. In some instances, respective state NIL laws may conflict with the NCAA’s universally applied NIL legislation and policies. On June 27, 2023, the NCAA published an NIL Update Memo providing answers to frequently asked questions and maintaining that NCAA legislation and policy is the governing authority when applicable state NIL laws conflict.

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