More College Sports
A few years ago, there was a push to create nonprofit, tax-exempt NIL collectives, putatively tax-exempt organizations that collected donations and then used those donations to pay college athletes.
The IRS eventually looked at NIL collectives and determined that private benefit was central to NIL collectives and that thus they didn’t qualify as tax-exempt. The IRS’s determination ruined the market for NIL collectives, though that soon proved unimportant, as the NCAA ultimately agreed to allow schools to pay student-athletes directly effective July 1, 2025.
That agreement came with its own problems, as a recent Associated Press story explains. Top schools may need to pay up to $40 million per year to get the players they want to field a successful season. That $40 million is a lot of money, particularly in an increasingly difficult financial environment for colleges and universities.
So what are college athletic programs doing? At least some see to be turning back to the NIL collective playbook: creating nonprofits to raise revenue for their athletic programs. For example, the University of Louisville
“launched Cardinal Ventures, a nonprofit designed to help the athletic department leverage its brand to generate new revenue streams, all to keep pace with the multibillion-dollar market around compensating athletes for the use of their name, image and likeness.”
Now, it’s not clear exactly where these plans, or these nonprofits, are going. But it’s hard to see significant daylight between these new organizations and the NIL collectives of a couple years ago. Maybe you get some difference because the new nonprofits are raising money for college athletic programs to pay athletes, rather than the nonprofits paying athletes themselves. But between reported Congressional scrutiny and the risk of failing to get tax-exempt status, I’m skeptical that this new move in the financing-college-athletics wars will work out.
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