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IRS Says Donations Made to Nonprofit NIL Collectives Are Not Tax Exempt

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TheOriginalCane said:
Uh, yeah, you are completely correct. I realize we have a bunch of guys who think they can outsmart the IRS with their brilliant hypotheticals, but it doesn't work that way.

The organization is the key. Religions and universities are fine, regardless of whether some ****head pastor spends church donations on a private jet.

And, yes, the form and substance mean something. Collectives are simply transferring money to individuals to spend it how they choose. Even in the most opulent university/religion situation, the "private jet" is still owned by the organization, not the individuals involved.

And earmarked donations to any one branch of a university are fine, as long as there is a corresponding reduction for the value of anything received in exchange.
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I gotta disagree a little bit here. The way a tax exempt collective works is that the donor makes a donation to the collective which then donates the funds to a charity which then pays a player for work associated with the charitable purpose of the charitable organization.

So the IRS is looking beyind the fact that the funds do actually flow through a charitable organization… now I agree that big brothers big sisters paying a player to attend community events funded by a donation from a NIL collective is different than a university building a new Hollywood locker room with 500k of video game hardware (lol)… but maybe not thaaat different.
 
AmherstCane said:
I gotta disagree a little bit here. The way a tax exempt collective works is that the donor makes a donation to the collective which then donates the funds to a charity which then pays a player for work associated with the charitable purpose of the charitable organization.

So the IRS is looking beyind the fact that the funds do actually flow through a charitable organization… now I agree that big brothers big sisters paying a player to attend community events funded by a donation from a NIL collective is different than a university building a new Hollywood locker room with 500k of video game hardware (lol)… but maybe not thaaat different.
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This is not a charitable purpose. This is a marketing firm or a sports agency.
 
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AmherstCane said:
I gotta disagree a little bit here. The way a tax exempt collective works is that the donor makes a donation to the collective which then donates the funds to a charity which then pays a player for work associated with the charitable purpose of the charitable organization.

So the IRS is looking beyind the fact that the funds do actually flow through a charitable organization… now I agree that big brothers big sisters paying a player to attend community events funded by a donation from a NIL collective is different than a university building a new Hollywood locker room with 500k of video game hardware (lol)… but maybe not thaaat different.
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I'm gonna defer to @wspcane , he is the expert on charitable organizations, but I'll also say that you can't "clean this up" by running it through a couple of organizations. If the United Way gave money to the Boy Scouts of America, and then BSA wasn't doing anything charitable except for paying a couple of athletes, it would be a problem.
 
90scane said:
Only twice?!

Medicare
Ssn
Federal
State
Personal property County
Sales tax
Cap gains
gas tax

I’m sure I could name a few more.
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SSN isn't really a tax, one could consider it a payment into a retirement fund. For those that will be able to pull SSN, you'll get your money back(In Theory).
 
Which is why in the case of Lifewallet for example, they can deduct the NIL payment as an expense for advertising (if that’s how they do it). Money still goes to the player but the organization can deduct it as a business expense. Collectives receiving money is basically Income which is taxable, and since they aren’t a business they can’t deduct any portion of the payments.
 
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wspcane said:
This is not a charitable purpose. This is a marketing firm or a sports agency.
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I’m not saying you’re wrong - but you are making a judgment call beyond the actual form and structure of the organizations. At least for the Miami collective the money does flow through an actual charitable organization to the players.

I’m sure the people running the collective would say the purpose is to aggregate and deliver donation to c3 organizations… which then gets used to pay players to further the missions of the charitable organizations involved.
 
passitback said:
LOL @ this bull****. Sounds like money laundering to me. CFB players should pax taxes on every single penny they collect, and I hope the IRS gets back taxes.
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This has nothing to do with the players paying taxes. The players pay taxes no matter where the money comes from. This has to do with whether the donor has to pay taxes on the money donated.
 
TheOriginalCane said:
I'm gonna defer to @wspcane , he is the expert on charitable organizations, but I'll also say that you can't "clean this up" by running it through a couple of organizations. If the United Way gave money to the Boy Scouts of America, and then BSA wasn't doing anything charitable except for paying a couple of athletes, it would be a problem.
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Look I would prefer it be deductible because it is easier to make 5 and 6 figures donations when they are deductible and the players will still pay taxes on the money received… but I also understand that this is not the intent of the charitable contribution deduction rule.

Of course, neither is a hollywood studio locker room to help recruit 17 year olds for sport.

I will say, however, the charities involved in NIL collectives are very real and legitimate charities and they are paying players for doing work for the charities. Not saying it makes it right… but they are real charities not BS flow through entities. At least in the case of Miami.
 
We all know that the NCAA is a completely incompetent cluster**** of an organization but **** if the IRS doesn’t try to just as worthless. It should come as no surprise that something both are involved in turns to ****. Morons.
 
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Skitz305 said:
Which is why in the case of Lifewallet for example, they can deduct the NIL payment as an expense for advertising (if that’s how they do it). Money still goes to the player but the organization can deduct it as a business expense. Collectives receiving money is basically Income which is taxable, and since they aren’t a business they can’t deduct any portion of the payments.
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And presumably the kids are on payroll being taxed accordingly.
 
Canedude08 said:
SSN isn't really a tax, one could consider it a payment into a retirement fund. For those that will be able to pull SSN, you'll get your money back(In Theory).
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It is absolutely a tax. What is stolen from me for Social Security grossly underperforms what I invest on my own, even if I actually am able to collect SS money (which I highly doubt I'll ever see).
 
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AmherstCane said:
Look I would prefer it be deductible because it is easier to make 5 and 6 figures donations when they are deductible and the players will still pay taxes on the money received… but I also understand that this is not the intent of the charitable contribution deduction rule.

Of course, neither is a hollywood studio locker room to help recruit 17 year olds for sport.

I will say, however, the charities involved in NIL collectives are very real and legitimate charities and they are paying players for doing work for the charities. Not saying it makes it right… but they are real charities not BS flow through entities. At least in the case of Miami.
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If somebody donated 100k directly to make a wish, and make a wish ‘decided’ to pay x player 80k to make a kids wish come true there may be an argument for some cases being tax deductible. The boosters aren’t donating to a charity though through a collective. It’s tax evasion regardless of the end recipient or entity it ends up flowing to.

To me it’s similar to a gofundme. Almost all of them are not deductible as they are considered personal gifts, however there are some instances if you’re donating directly to a cause through gofundme it could be deductible. Collectives are essentially a personal donation to a gofundme page for athletes salaries.
 
mirvin88 said:
I’m fine with this. We can argue taxes and semantics all day, but an NIL donation to pay a college athletes ‘salary’ is not a charitable donation.
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Maybe when the IRS gets done with this they can turn their talents next to “foundations”. Where’s the crook Lois Lerner when we need her?
 
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