NIL Newsletter #4 | Thursday, July 22, 2021
Welcome to the NIL Newsletter by Optimum Sports Consulting - providing valuable, actionable NIL resources for athletes, administrators, agencies and other sport professionals.
Welcome to the NIL Newsletter by Optimum Sports Consulting.
Through this newsletter and our additional legal and advisory resources, we aim valuable, actionable NIL resources for athletes, administrators, agencies and other sport professionals.
Every Monday (at 8:30am ET) and Thursday (at 8:30am ET), we will catch you up to speed with the latest news surrounding Name/Image/Likeness (NIL) in college athletics- directly to your email inbox. This newsletter is currently FREE.
Follow us @OptimumSportsConsulting on Instagram and @OptimumSportsC on Twitter for daily content.
This Thursday’s Newsletter Includes
Recapping NIL News This Week
Deep Dive on Tax Liability and Best Practices for Athlete’s Tax Considerations
ICYMI: Mark Emmert talks the Finances and Future of NCAA
Recapping NIL This Week
Commissioners and coaches at conference media days and events spoke candidly about NIL
“It is unfortunate that we do not have a single national standard. It is a challenge to run national championships without national standards of conduct. Quite frankly, this is a failure by the entire association and reflects a lack of strategic direction and execution,” MAC Commissioner Jon Steinbrecher told reporters. “The NCAA had two choices. One, pursue a legal strategy challenging California, and/or implementing its own NIL legislation. The first was not pursued; the second was not accomplished.”
“Our QB (Bryce Young) has already approached ungodly numbers, and he hasn’t even played yet,” Alabama HC Nick Saban said at the Texas High School Coaches Association convention, according to 247 Sports. “If I told you what it is… it’s almost seven figures.”
Atlantic Coast Conference Commissioner Jim Phillips said at the ‘State of the ACC Address’, “The success stories are many. We're seeing all of it around the country... But we have some real challenges ahead if we don't get national legislation…. You are already seeing across the country the wide-ranging disparity at times, depending on what state you're in, what people are able to do.” Phillips added, “We have to have some help on antitrust. We can't sustain constant litigation to the enterprise of college athletics.”
Georgia HC Kirby Smart on NIL: “I don't think personally it's going to blow up college football.”
Mississippi St. HC Mike Leach suggests NIL deals that pay college athletes X amount of dollars only if and when they graduate- as long as it doesn't create bidding wars between schools. "If we end up with bidding wars that will definitely hurt football."
Student athlete logos are continuing to be filed with the USPTO
Hours before NIL deals began to take effect on July 1st, Wisconsin QB Graham Mertz posted a teaser video on his social media for his new logo. As more players sign with agencies, execute endorsement deals, and launch their own apparel companies, more student athletes are taking the proper legal step by filing TMs with the US Patent and Trademark Office. Check out the graphic below with some of the top logos thus far.
Luke Morhauser, writing for Conduct Detrimental, explained the various IP and legal issues facing student athletes and their schools regarding future licensing agreements. “While it is great that athletes are able to start making money on their rights of publicity, the universities will still be able to have at least some control on how they are presented. However it pans out, it is going to be a busy time to be in compliance and IP law associated with universities.”
On July 20th, the University of North Carolina Tarheels announced a voluntary, Group Licensing Program for its current student athletes. The Program is intended to allow the athletes to “benefit from their NIL in conjunction with UNC's official trademarks and logos.” However, the athletes are not obligated to join this program, and are still able to negotiate their own licensing opportunities outside of the program.
Deep Dive: With Great (NIL) Power Comes Great (Tax) Responsibility
As student athletes begin to generate substantial income from NIL activity, it is imperative that they know their tax responsibilities. Proper financial education can make a huge difference.
Written by Austin Meo
Financial details of several student athlete NIL deals have come to light since July 1st, and speculation has grown steadily about the tax issues they will cause- especially since for many young adults, this will be the first time they are making a sizable income. Since day one, experts across college athletics and in the world of sports law have recommended students hire licensed agents and/or barred attorneys to review proposed NIL deals before they sign. But how about after the deal goes through and student athletes start to get paid?
Proper accounting education and tax advice will be the crucial next step for student athletes as institutions continually look for ways to support them. Luckily, business experts have already begun to weigh in- answering questions and giving an initial outline of what numbers and types of income student athletes should be looking out for.
In general, any type of compensation made from NIL is taxable. In addition to cash payments (say for posting on social media, signing autographs or taking pictures at a meet and greet), other forms of compensation include automobiles, company credit (gift cards; spending allowance), goods or sales of products. NIL compensation is considered “Self-Employment” income, and thus is subject to the self-employment tax rate of 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance) up to $142,800.
If a student athlete receives any compensation package over $600, they should receive a 1099 form from the paying company (but if an SA doesn’t receive one, they still have to report).
For federal taxes, the magic number is $12,550 (up from $12,400 in 2020). If a single filer has income less than this amount, they won’t owe federal taxes. That figure increases to $18,800 if they are the head of household and $25,100 if they are married and jointly filing. For state taxes, this will depend on where a student athlete’s residency status.
Note that if a student athlete had income in 2020, they may have to pay quarterly estimated taxes for any income earned from NIL in 2021. Thus, an athlete could have a tax payment due as soon as September 15, 2021.
Aaron Goldberg and Zach Miller have written a great framework for student athletes to follow on their AWM Blog. Michael McCann and Robert Raiola for Sportico also went into detail about taxes- both for students and the companies endorsing them. Forbes’ Tax Notes Talks podcast did a deep dive into the results of Alston and what general issues student athletes might face as they file their taxes in April.
Points for student athletes, agents and administrators to consider:
If a student athlete is on any type of need-based scholarship, financial aid or grant, NIL income might affect their overall situation with their academic institution. Athletic departments and their student athletes should work directly with the school’s financial aid + bursar offices to set up a game plan. The intricacies of each type can be complicated, so it is best to get an individualized evaluation and long-term strategy set up.
Taxes from the state you live in versus the state you work in can vary. Much like state NIL laws, this is important to understand before filing and should be guided by a tax specialist + financial education.
State income tax rates, once thought to be a substantial puzzle piece in professional sport deals, might now be one of the biggest leverage points in high school recruiting. California (13.3%), Oregon (9.9%), Arizona (8.0%) and South Carolina (7.0%) could be at a disadvantage against Florida and Texas. For reference, nine states currently do not have income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
ICYMI: NCAA Financial Data Released + Mark Emmert Talked to the Press
The NCAA released its financial data for the past fiscal year, which included salary information, a steep revenue decline, and a lengthy legal bill. President Mark Emmert also told reporters that the time has come to restructure the NCAA.
“We need to reconsider delegation of a lot of the things that are now done at the national level,” Mark Emmert told reporters this past Thursday.
“Much of what I’m talking about is, in fact, that new environment, and you can do one of two things,” Emmert said. “You can lean back and do nothing and then just wait and see what happens. Or you can say, ‘Look, this is a new era, we need to take advantage of it, pivot as much as we can to the other areas I was just talking about and embrace that change rather than fighting it.’”
10 NCAA employees made more than $500,000 in the 2019-20 fiscal year, including President Mark Emmert ($2.9 million), COO Donald Remy ($1.7 million) and EVP Stan Wilcox ($1.3 million).
The organization brought in $521 million between Sept. 1, 2019, and Aug. 31, 2020, down from more than $1 billion in revenue the previous fiscal year, according to tax returns. Much of that missing revenue was due to the cancellation of March Madness and other national championship events due to COVID-19. The NCAA's expenses also dropped by nearly 40% during that same time period.
The NCAA's legal expenses for fiscal 2020 were just over $11 million more than the association had reported for this expense category for any single fiscal year, going back to at least fiscal 2009. The association said in its statement Monday that the fiscal 2020 amount "is due to an accrual of $34.8 million related to the Alston case."
The NCAA paid more than $68 million for legal counsel and $500,000 to lobbyists during a year in which its amateurism rules were under fire from both the judicial and legislative branches of government. Over its past six fiscal years, the NCAA has reported a total of $252.1 million in outside legal expenses and $69.1 million in legal-cost insurance recoveries.