Revenue Share and International Student-Athletes: What Universities Need to Know

As the House settlement reshapes collegiate athletics, universities are actively distributing revenue share payments to student-athletes. But for institutions with international athletes, there’s an added layer of complexity that should not be underestimated. This Sportico article highlights the current debate.

International athletes, particularly those on F-1 visas, raise unique tax and immigration concerns. We’ve seen schools trying to navigate both, sometimes with incomplete or outdated information. We are not immigration attorneys, and we don’t offer legal advice on student visa compliance. But we do assist schools in structuring athlete payments, and we’re seeing enough to be concerned about how these decisions are being made.

The bottom line is this: Tax law and immigration law are not the same. Relying on one to solve the other can get both your institution and your student-athletes into trouble.

Passive vs. Active? The Classification That Matters

Some schools are exploring the idea of characterizing revenue share payments to international athletes as “royalties.” The thinking is that royalties are passive income, and passive income doesn’t violate F-1 visa rules. But this is where the nuance begins.

Payment for use of NIL is generally passive if there is no material participation. In today’s environment, where revenue share may involve brand promotion, content creation and appearances, it’s unlikely the IRS would consider this passive income. Labeling it as a royalty may not change that outcome. More critically, it may breach visa conditions if not carefully evaluated through both a tax and immigration lens.

Tax Reporting and Withholding: Why 1099s Don’t Apply to Foreign Student-Athletes

There is also confusion around tax reporting. Domestic athletes typically receive either Form 1099-MISC or 1099-NEC depending on the nature of the payment. But these forms are for U.S. taxpayers. International student-athletes are considered nonresident aliens for tax purposes and should not receive either form. Instead, payments to nonresident individuals must be reported on Form 1042-S. The reporting difference is more than a technicality.

Withholding Obligations for U.S.-Source Income

When a university pays a nonresident athlete, it acts as a withholding agent under U.S. tax law and must determine:

• Whether the income is sourced in the U.S..
• Whether tax withholding applies and at what rate.
• Whether a tax treaty provides for an exemption or reduced rate.

If no tax treaty applies, or if no valid documentation is submitted, the payer must withhold 30% and report the payment on Form 1042-S.

Calling revenue share a royalty to avoid immigration problems doesn’t avoid tax withholding requirements. This applies regardless of whether the payment is made directly by the university or through an affiliated collective or foundation. Any U.S. entity making the payment is considered a withholding agent and must comply with IRS reporting and withholding rules. Failure to do so can result in penalties for the institution and potential immigration consequences for the athlete.

Tax Treaties

Some athletes may qualify for reduced withholding rates under income tax treaties between the U.S. and their home countries. These treaties vary by country and specify which income types they apply to. Some cover scholarships, some cover royalties and some cover services. But many do not apply to all three.

To claim treaty benefits and qualify for reduced withholding:

• The student-athlete must submit IRS Form W-8BEN.
• They must claim the treaty benefit under a valid Article (e.g., royalty or independent services).
• The university must retain this documentation and apply the reduced rate.

But there’s a catch. Treaties can vary significantly by country, and they may only apply to certain types of income or for a limited time. Also, without a W-8BEN and verified treaty claim, the default 30% withholding applies — even if the athlete could technically qualify for a lower rate.

W-8BEN is technically completed by the student. However, it’s a deceptively complex form that requires knowledge of both U.S. withholding rules and treaty interpretation. Most international athletes don’t have access to tax advisors, so they often rely on their schools for help. Yet most institutions lack specialized tax expertise needed to guide them through the process. Unlike the more straightforward Form W-9 used for domestic athletes, W-8BEN involves multiple layers of compliance and treaty analysis. That’s why it’s critical to address W-8BEN requirements proactively, ideally before any revenue share payments are issued.

This process shouldn’t be unfamiliar for campuses, as international athletes have already been receiving scholarships or grants.

What Athletics Administrators and Campus Finance Leaders Should Be Doing

If your department is preparing to distribute revenue share payments to international athletes, take the following steps now:

1. Confirm the residency status of all student-athletes for tax purposes.
2. Coordinate closely with immigration counsel to ensure payments do not conflict with visa restrictions (or find alternative visa options).
3. Review applicable tax treaties and collect W-8BEN forms where relevant.
4. Prepare to report and withhold using Form 1042-S and Form 1042.

These steps are not just best practices. They are necessary protections given the current administration’s stance on immigration and higher education. Not only could incorrect classification or reporting jeopardize an athlete’s visa status or expose the university to IRS penalties, but it can also create a reputational risk in an already sensitive landscape.

If you’re paying international student-athletes, consult both tax and immigration professionals—always. This article does not replace the need to consult with a qualified immigration attorney to determine whether your institution can or should be making revenue share payments to student-athletes on F-1 visas in the first place.

If you’re unsure how to properly report or withhold payments to international student-athletes, the James Moore’s higher education and collegiate athletics CPAs and international tax advisors can help.

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