Wake and Fontein Cover Tax Implications of College Athletes’ NIL Deals

May 5, 2022

McGuireWoods Chicago partner Sarah Wake and Dallas associate Addison Fontein co-authored an article titled “NCAA Athletes Will Need a New Playbook to Score on Tax Day,” published by Bloomberg’s Daily Tax Report on April 26, 2022.

In the article, the authors reviewed a brief history of National Collegiate Athletic Association rules that previously barred athletes from profiting from their name, image and likeness (NIL). Changes to state laws now enable college athletes to receive compensation for NIL deals with major companies and brands.

The authors cautioned that those deals, which may include social media partnerships, “likely presented a new set of considerations for student athletes” who qualify as independent contractors subject to self-employment taxes.

The article detailed lesser-known tax repercussions of collecting NIL revenue, including tax considerations for noncash deals, implications of operating as a sole proprietorship or a limited-liability company, reporting requirements, and the potential impact on students’ eligibility to receive grants as well as their parents’ tax filings.

“While NIL was a welcomed change for many, its quick and unregulated implementation is sure to present unwelcome surprises to some student athletes,” the authors concluded.

Wake, a labor and employment partner, previously served as associate general counsel and interim associate vice president for equity at Northwestern University and is a former member of the NCAA Division I Committee on Infractions. Fontein, a complex commercial litigator, previously wrote about tax implications for professional athletes in the Sports & Entertainment Journal published by the Arizona State University Sandra Day O’Connor College of Law.