An NIL Collective’s Tax Exempt Bovine Defecation is Working So Far

Sportico, an excellent online sports business publication, has an interesting series of articles about some flagrant private benefit effectuated by an allegedly charitable organization that maintains donor advised funds managed by a for-profit company that also controls the charitable organization and simultaneously manages eight or nine for-profit NIL collectives receiving distributions indirectly from the DAFs.  If the facts were made up for a law school final exam, I would expect students to raise private benefit, DAF abuse, and step-transaction issues all over the place.  The best exam answer would also make the case for imposition of excise taxes on other participating charities.  Here is the opening paragraph of the latest article in the series:

BPS Foundation, the nonprofit partner of NIL collective operator Blueprint Sports, took in $14 million in contributions last year—more than quadrupling its previous annual haul—despite mounting questions about the charitable purpose of it and similar organizations that pay NCAA athletes.  Of the 2023 revenue it raised, BPS Foundation distributed $9.4 million to athletes, according to a copy of the a 501(c)(3) nonprofit’s 2023 federal tax return. BPS Foundation has a shared services contract with Blueprint Sports, which operates or services more than 25 for-profit NIL collectives around the country. In 2023, the foundation paid the company $1.05 million in management fees, the tax filing shows . . . In effect, the foundation serves as a tax-deductible passthrough enabling donors to receive a write-off for moneys that ultimately go to Blueprint’s for-profit collectives.

Here is BPS’s interesting 990 proving all of that.  As near as I can tell, Blueprint Sports provides management services or tax advice to for-profit collectives arranging payments to football players at Arizona, North Carolina State, Boston College, Montana State, Penn State, Nevada, UNLV, Gonzaga and UC Santa Barbara.  D-1 football schools in those jurisdictions maintained or contemplated exempt NIL collectives until Chief Counsel put the kybosh on 501(c)(3) status on private benefit grounds.  As a workaround, Blueprint Sports set up a charitable organization – BPS Foundation — to maintain donor advised funds.  BPS Foundation’s web page shows big burly guys interacting with elementary kids. 

BPS Foundation, a Section 501(c)(3) organization, educates, encourages, and assists athletes in their efforts to engage with the local community through charitable causes. BPS Foundation lifts awareness of what it means to perform in a highly competitive environment by mobilizing collegiate athletes to help teach how hard work, discipline, focus, and continued education can make the young athlete’s dreams become a reality.  BPS Foundation empowers these athletes to channel their energy for a common goal: to make the community where they live and play a better place.

Aww, that is so sweet.  But look closely.  The Foundation is part of an obviously illegitimate NIL workaround.  It’s an NIL Collective disguised as a DAF sponsor.  Donors contributed to BPS Foundation and took deductions.  The Foundation set up DAFs and then donors “advised” BPS Foundation to make distributions to charities associated with their favorite football universities.  BPS routinely complied, as do most DAF sponsors.  Those charities used the inevitable distributions to compensate student-athletes who performed services for the charities while also playing football for the local D1 football team.  Here is a brief description from an earlier article in the series:

One of Blueprint’s main selling points is “501(c)(3) fundraising.” Specifically, it has a companion charity, called the BPS Foundation, which allows Blueprint’s NIL collective clients to receive tax-deductible contributions.  In effect, the BPS Foundation serves as a donor-advised fund for college sports boosters who want to contribute to for-profit NIL collectives. Instead of making the contribution to the collective directly, they would instead donate to the nonprofit, which would then be responsible for paying athletes served by the collective.

The description above leaves out the part where BPS Foundation makes advised donations to local charities earmarked for  some star football player.  I added that because that must be the way the whole thing is carried out.  As noted earlier, of the $14 million in deductible contributions made to BPS donor advised funds, $9.4 million went to student-athletes, and another million went to Blueprint Sports for managing BPS.  That’s about 75% that went to football players (for tossing a few footballs to kids around the elementary school playground) and the private management company that set all this up.  The earlier article quotes our own Phil Hackney who, in his usual polite and erudite fashion, allows that the management company arrangement raises conflict of interest and private benefit concerns. For its part, BPS claims that it is working in good faith to comply with all tax laws and is “one of the good guys.” 

I am a little older than Phil.  I am closer to the age where being polite is not so important anymore.  And frankly, the whole thing stinks like a big pile of steaming bullshit.  How some people get away with preposterous stuff, I’ll never know.

darryll k. jones