Name, image, liability

Student-athletes may face unexpected tax liabilities from compensation for their name, image, or likeness now allowable under NCAA rules.
By Jacob T. Crowley, CPA


Historically, student-athletes participating at NCAA colleges and universities could not make money based on their name, image, or likeness (NIL). However, in fall 2019, California passed S.B. 206, the Fair Pay to Play Act, allowing college athletes to be paid for their NIL and regulating the practice. California’s law took effect in September 2021. Other states followed suit. Since then, more than two dozen states have passed NIL laws (see NIL Network, “NIL State Laws”). In 2020, NCAA President Mark Emmert made a plea before Congress to enact restrictions on NIL deals and practices, but to date, Congress has not done so. With 13 states’ laws set to take effect on July 1, 2021, the NCAA suspended its previous NIL rules on June 30, 2021, and created interim rules allowing NIL payments under certain guidelines.

Subsequently, the college athletics world has been flooded with NIL deals for student-athletes to represent and promote brands and companies. Additionally, many large university alumni bases are organizing NIL “collectives,” business entities that pool money from alumni and athletic boosters to fund and facilitate NIL deals. Most NIL collectives are for-profit, but some have filed for Sec. 501(c)(3) tax-exempt, not-for-profit status.

Now, more than ever, student-athletes need help when it comes to tax planning and financial literacy (see the sidebar, “Tips for Student-Athletes”). As part of the ruling by the NCAA board of directors, student-athletes are not considered employees of universities or NIL entities. Rather, they are independent contractors, and the companies sponsoring them are not required to withhold or remit federal or state income tax, Social Security tax, or Medicare tax. This opens a plethora of tax implications for young and busy student-athletes who possibly don’t have the resources or knowledge to navigate this intricate tax space.


CPA firms now have an untapped market of new clients as well. According to ESPN, around 25% of all college athletes across 200-plus schools in all three divisions have signed an NIL deal. How can firms help potential clients manage the millions of dollars being funneled to 18- to 23-year-old college athletes?

Katie Davis, CPA, partner and collegiate athletics services leader at Florida-based CPA firm James Moore and Co., sees many opportunities for firms to assist student-athletes with their tax education, planning, and preparation.

“Bringing a value-added service to colleges and universities to educate student-athletes on the tax planning and fiscal responsibility of NIL is our first step,” she said.

While many of the NIL education engagements are combined into other services that James Moore offers to the universities they work with, Davis sees an opportunity for firms to team up with local collectives as well.

“If your firm has a strong SALT [state and local tax] practice, reaching an agreement with your local university’s collective to offer tax planning and preparation and even financial planning as part of the collective’s NIL offerings makes sense,” she said.

While collectives are relatively new, they have already garnered controversy. Some overseers have expressed concerns that they may raise the stakes for student-athletes’ recruitment and transfer and create a “pay-for-play” environment. Based on the current interim policy approved by the NCAA, collectives are not to be included in the recruiting process and are to be completely separate, unrelated entities from universities. That said, NIL still can be a factor in athletes’ decision to attend a university.

For example, Savion Washington, a recent transfer student-athlete at the University of Colorado, said, “NIL opportunities tend to follow larger and more competitive schools. My decision to transfer to University of Colorado was based on the fact that I have a better opportunity to play at a high level; the possible NIL opportunities are a bonus.”

Tax planning can be an integral part of the NIL agreement for the student-athlete and the collective alike.

Davis explains that this is another scenario for firms to aid a new market. Once the IRS starts auditing NIL deals and collectives, she said, clients could find “having a strong relationship with a CPA firm extremely valuable.”

Some collectives have filed for tax exemption as Sec. 501(c)(3) not-for-profit entities, which imposes additional regulatory burdens.

“Some NIL collectives have gone the nonprofit route, which can be a bit concerning,” Davis said. “Nonprofits have additional IRS filings to the public, and there could be some backlash on donors taking tax deductions to pay athletes based on their name, image, and likeness.”

Collectives that have successfully obtained Sec. 501(c)(3) status need to operate carefully and could benefit from the support of a CPA firm. To not have revenue taxed as part of unrelated business income, the collective must make sure that all payments to student-athletes are made in an effort to carry out the organization’s charitable purpose rather than promoting goods or services. Often, this can include speaking engagements, autograph signings, and appearances at other local not-for-profit entities to support their mission. It is also important to note that these payments to collectives cannot exceed the fair market value of their services.

Reaching out to support a local university’s athletic program is an excellent first step for firms that want to be involved in the NIL space. Many universities are partnering with firms to offer these services for their student-athletes, which can lead to tax representation. Networking and connecting with NIL collectives to prepare reporting forms and file returns is another area firms can benefit from.


How is NIL compensation taxed, and what can student-athletes’ CPA tax preparers expect as their clients receive income through NIL deals? Whether the student-athletes are paid cash, given a car to use, issued cryptocurrency, or even given free food, the value of these goods or services is subject to the self-employment rules under the Internal Revenue Code, and taxes can be significant. Students will typically receive a Form 1099-NEC, Nonemployee Compensation; Form 1099-K, Payment Card and Third Party Network Transactions; and/or Form 1099-MISC, Miscellaneous Information, reporting NIL compensation or payments.

NIL entities send the Form 1099-NEC to student-athletes who receive direct compensation in the form of cash for a service. Again, no income tax withholding necessarily applies. Payment settlement entities provide a Form 1099-K to a studentathlete if he or she is paid through a third-party network, such as Venmo or PayPal. A 1099-MISC is typically used when the student-athlete receives physical goods, rather than cash, for their services and for royalties.

Student-athletes who do not plan appropriately can owe large tax liabilities, often money they don’t have, since, in many cases, they received goods rather than cash. One way to combat this problem is for the student-athlete to ask for some cash payment as part of the NIL agreement. For example, if a student-athlete is given a new Mercedes to drive for the duration of the year, a benefit valued at $20,000, the student-athlete could negotiate with the NIL sponsor for a cash payment of 40% of the value of the goods expected to be received. In this example, that would be $8,000. Of course, studentathletes then need to save the cash they received as part of their NIL agreement to pay their tax liability come tax season.

Deann Newman, CPA, is a retired Deloitte tax partner who previously worked with high-networth individuals and has discussed NIL at the college and not-for-profit level as part of her activities as a board member of Ohio Northern University’s Dicke College of Business Administration. She notes that NIL may also be subject to state and local income taxes. In addition, while a student is typically subject to the lowest federal tax rates, the income from the NIL is likely to push the student into a higher tax bracket, subjecting that income to higher tax rates. For example, if the studentathlete’s marginal tax rate is 22%, adding to that the 15.3% Self-Employed Contributions Act rate and a hypothetical 6.5% state tax rate totals 43.8%.

“The key is to plan ahead and make sure to reserve enough cash to pay the taxes due,” Newman said. “Student-athletes also may need to make estimated tax payments each quarter, versus waiting to pay the full tax bill at tax return filing time.”


Additionally, universities and colleges across all levels of athletics now have an opportunity to inform and educate their student-athletes on the legal and tax implications of NIL deals. This can be another opportunity for a firm, or even a student organization, to step in.

Angela Robinson-Pittman, CFO of athletic services at the University of Mississippi, says that universities are doing their students and athletic departments a disservice if they are not educating and informing everyone involved in the athletics process.

“About twice a year, we invite a CPA firm and local bank to come speak with our student-athletes in what we call our financial education program,” she said. “The firm discusses tax implications of NIL contracts and covers how to organize 1099s and expenses.”

As well as providing these services to studentathletes, universities can tap into their student organizations and other resources on campus. For example, the Beta Alpha Psi chapter at Ohio Northern University offers monthly tax planning and investment basics courses for students on campus in addition to the chapter’s Volunteer Income Tax Assistance (VITA) program, which offers free tax return preparation to students on campus and members of the community. Campus business incubators and centers for entrepreneurship are another valuable resource, often housed in the college of business, for helping students to develop a business. As more guidance and support is published by states and the NCAA, firms and universities must continue to be adaptive and proactive in supporting students and universities in this new space.

Tips for student-athletes

Here are some tips practitioners can give student-athletes:

  • Get in touch with your athletic director, compliance office, or CFO of athletic services. Many large universities have resources for their studentathletes for such assistance.
  • Contact your business school. Many schools offer free tax preparation or could introduce you to community organizations that offer Volunteer Income Tax Assistance (VITA) program services.
  • Discuss your situation with an accounting faculty member. Your professor can likely connect you with a local CPA firm or alumni to prepare your taxes and offer some tax planning advice.
  • If signing with an NIL collective, ask the collective representative if they offer tax planning and preparation as a benefit.
  • If you are offered a noncash benefit such as food or a vehicle, note that this is taxable in most scenarios. Ask your sponsoring company or collective if they will add a cash payment to the agreement at, for example, 40% of the value of your noncash item. Saving this cash for your tax return will improve the likelihood that you have the additional dollars available for your tax liability. Investigate whether you may need to file estimated tax payments throughout the year.
  • Students profiting from their NIL are essentially running a business. Keeping good records of airfare, hotel, food, and other expenses when performing your NIL contract is essential to reducing your tax burden. Tracking the state of activity is also essential for state tax filings.
  • Get in touch with your financial aid office. Be aware that your NIL earnings have implications for the Free Application for Federal Student Aid (FAFSA) if you are receiving federal aid.

About the author

Jacob T. Crowley, CPA, is an assistant professor of accounting at Ohio Northern University in Ada, Ohio. To comment on this article or to suggest an idea for another article, contact Paul Bonner at


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