Name, Income Tax, and Likeness: The Tax Implications of NIL

Introduction

The introduction of Name, Image, and Likeness (NIL) rights has dramatically altered collegiate athletics, enabling student-athletes to monetize their personal brands. However, these opportunities also introduce complex tax liabilities that many student-athletes are ill-equipped to manage. Given the NCAA’s restrictions on institutional support and the general lack of financial literacy among student-athletes, many may face significant tax liabilities without proper guidance.

This blog examines the tax implications of NIL compensation, the inadequacies of NCAA policies, and the potential legal and policy solutions to address these issues.

Tax Complexities in NIL Compensation

NIL earnings, unlike traditional employment wages, are typically classified as self-employment income, meaning student-athletes must manage their own tax liabilities, including estimated tax payments and self-employment tax.[1] Unlike employees, whose employers withhold taxes, student-athletes often receive lump-sum NIL payments without any tax deductions, potentially resulting in significant liabilities at tax time.[2]

Beyond cash payments, non-cash benefits such as free merchandise, product discounts, and even vehicles are also considered taxable income.[3] Student-athletes who accept high-value items may find themselves with substantial tax obligations despite lacking liquid assets to cover them. These tax burdens can be particularly challenging for younger individuals unfamiliar with tax regulations.

Additionally, international student-athletes face even more challenges navigating NIL. Generally, international student-athletes are instructed by most institutions to not take NIL compensation.[4] NIL earnings could violate visa restrictions or affect future immigration applications. Unpaid tax liabilities may also complicate attempts to secure permanent residency or citizenship.

NCAA Regulations

Despite these complexities, NCAA regulations prohibit universities from providing tax preparation or financial advisory services unless those services are available to all students.[5] While intended to ensure equity between student-athletes and non-athletes, this restriction fails to recognize the unique challenges student-athletes face. The NCAA’s position on these limitations has become increasingly tenuous in light of NCAA v. Alston, where the Supreme Court ruled that restricting education-related benefits violated federal antitrust law.[6] Financial education and tax compliance services arguably fall within this category, raising questions about whether future litigation could challenge the NCAA’s current restrictions.

Proposed Solutions

1. Amending NCAA Rules to Permit Institutional Financial Services

The NCAA should revise its rules to allow universities to provide student-athletes with tax advisory services. Universities already invest heavily in their athletic programs—some spending five times more on student-athletes than on non-athletes—yet they are restricted from offering essential financial guidance.[7] Given the Supreme Court’s reasoning in Alston, financial literacy education, tax services, and contract review services should be considered a permissible educational benefits offered to student-athletes.

2. Utilizing NIL Collectives for These Services

Where NCAA rules restrict direct university involvement, NIL collectives—booster-funded independent organizations supporting student-athletes—can step in to offer advisory services.[8] Because these collectives operate independently from universities, they are not bound by NCAA regulations prohibiting institutional financial assistance. While NIL collectives currently focus on branding and contract negotiations, their expansion into compliance and advisory assistance would provide critical support for student-athletes navigating complex tax obligations.

3. Expanding NIL Focused Education

Student-athletes require comprehensive financial education to manage their NIL earnings responsibly. Potential strategies include:

Mandatory Tax Compliance Training: Student-athletes engaged in NIL activities should complete annual tax workshops covering self-employment taxation, deductible expenses, and estimated payments.

University-Backed NIL Courses: Some institutions, such as the University of Nebraska, offer NIL-specific coursework including tax planning and financial literacy training.[9] Expanding such programs across all NCAA schools would help standardize financial education.

Conclusion

The expansion of NIL rights has introduced significant financial opportunities but also complex tax challenges that many student-athletes are unprepared to navigate. Given the NCAA’s restrictions on institutional support, student-athletes must rely on external resources to manage their tax obligations.

To mitigate these issues, the NCAA should reconsider its prohibitions on student-athlete-only services, while universities and NIL collectives must take a more proactive role in educating student-athletes.

[1] 26 U.S.C.A. § 3402.

[2] Id. 

[3] 26 U.S.C.A. § 132.

[4] Aleksandr Troyb & Joshua Frieser, NIL Deals for Student Athletes, Benjamin, Gold, & Troyb P.C. (Apr. 25, 2022), https://www.bgtlawfirm.com/blog/nil-deals-for-international-student-athletes#:~:text=The%20NCAA%20and%20the%20states%20that%20have%20passed,international%20student-athletes%20the%20right%20to%20earn%20NIL%20compensation.

[5] Meghan Durham, DI Board Approves Clarifications for Interim NIL Policy, NCAA Media Center (Oct. 26, 2022), https://www.ncaa.org/news/2022/10/26/media-center-di-board-approves-clarifications-for-interim-nil-policy.aspx#:~:text=Schools%20cannot%2C%20under%20the%20interim%20policy%2C%20provide%20free,is%20also%20available%20to%20the%20general%20student%20body.

[6] NCAA v. Alston, 594 U.S. 69, 141 S. Ct. 2141 (2021)

[7]Stephen G. Katsinas et al., The Runaway Train: Intercollegiate Athletics Spending, 2003-4 to 2021-22, 49 J.  Education Finance 246 (2023).

[8] Ashley Alford, Understanding NIL Collectives: A Guide for College Athletes, Basepath (Aug. 29, 2023), https://basepath.com/understanding-nil-collectives-a-guide-for-college-athletes/.

[9] Erienne A. Weight & Robert H Zulio, Administration of Intercollegiate Athletics (1st ed. 2015).