Evolving Scenarios in Collegiate Athletics NIL Management

Collegiate athletics is seeing big transformations as state laws evolve to embrace name, image and likeness (NIL) rights. These changes are creating new opportunities and challenges in NIL management for universities, 501(c)(3) booster organizations and external NIL collectives.

These entities face unique challenges in this new regulatory environment as they balance compliance with maximizing benefits for student-athletes. Here are some potential scenarios for NIL deal management—and critical questions to consider as you prepare for the future.

Impact on Key Stakeholders

NIL rule adaptation impacts a wide range organizations involved with a typical university’s collegiate athletics. Universities themselves are developing internal policies to support athletes in pursuing NIL opportunities. They’re potentially partnering with third-party companies to facilitate NIL deals and ensuring these activities align with educational goals and legal requirements.

You also have 501(c)(3) booster organizations, which have traditionally supported athletic programs through fundraising. They now face complex tax implications and compliance issues as they figure out their potential roles in fundraising for and facilitating NIL activities. These organizations must carefully consider how their involvement in NIL management might affect their tax-exempt status. They also need to explore the legalities of directly supporting student-athletes through NIL deals.

NIL collectives, operating independently from universities and athletic departments, have become integral components of the collegiate athletics ecosystem. By pooling resources from alumni, fans and businesses, these collectives play a pivotal role in supporting student-athletes through NIL deals.

As NIL collectives navigate state laws, IRS regulations and NCAA guidelines, their significance may change further with anticipated new rules from the NCAA that might allow direct involvement of institutions in NIL activities. This evolution underscores the dynamic nature of NIL management and the adaptability required from all stakeholders to foster a balanced and equitable environment for collegiate athletics.

Scenarios Overview

With so many stakeholders, NIL management could take any number of forms. Here are a few hypotheticals to consider. Not all these scenarios are permissible structures as things currently stand with the NCAA. However, these possibilities could become reality soon depending upon changes the NCAA might make or individual states might legislate.

Possible Scenario One: NIL Collective to Athletes with Booster Organization Support

With assistance from the booster organization, the NIL collective raises money from individuals, business, etc. and creates NIL deals with student-athletes. This model represents the current state of NIL in many cases. It allows the collective to maintain its independence while it benefits from the booster organization’s fundraising support.

Possible Scenario Two: Booster Organization to Collective to Athletes

A booster organization collects donations and passes them to a collective, which then manages contracts with student-athletes. This model creates some degree of separation between the university and the NIL deal with the student-athlete while leveraging the collective’s expertise in contract management.

Possible Scenario Three: Booster Organization Directly to Athletes

This model involves booster organizations directly funding NIL contracts with athletes. It simplifies the flow of funds but raises questions about compliance and tax implications.

Possible Scenario Four: Booster Organization to University to Athletes

Donations move from booster organizations through universities, which then facilitate NIL agreements with athletes. This structure is the most direct model, with the university directly entering into NIL deals with their student-athletes. However, this creates potentially significant legal and employment law-related issues.

Open Questions and Considerations

Regardless of scenario, several key considerations around NIL management emerge—and all are crucial for stakeholders to address:

• Tax exemption risks: How might the significant financial flows associated with NIL deals impact the nonprofit status of booster organizations and institutions?
• Tax deductibility: Are donations intended for NIL purposes tax deductible under current regulations, and how does this vary by scenario?
• Alignment with exempt purpose: What strategies can ensure that NIL operations align with the original exempt purposes of nonprofit organizations?
• Control over recruitment: In scenarios involving collectives, how much control does the athletic department exercise over the recruitment of athletes?
• Title IX compliance: How can institutions make sure NIL opportunities are distributed equitably among male and female athletes across all scenarios?
• Employment relationship: Does the payment structure in any scenario suggest an employment relationship that could jeopardize the amateur status of student-athletes?

As NIL laws evolve and institutions adjust their policies accordingly, it’s important to consider these open questions. The answers will determine how effectively collegiate athletics can integrate NIL opportunities while maintaining compliance, fiscal responsibility and fair practices. This exploration is not only vital for current operations but will also shape the future of NIL management and collegiate sports in general.

With over 50 years of experience in collegiate athletics and pioneering NIL advisory services, James Moore equips you to navigate the NIL landscape with confidence and precision. Our team of CPAs and D1 athletic department advisors offers a unique financial perspective tailored exclusively to universities.

From strategy development to implementation, our affordable boutique NIL advisory services enhance your athletic department’s capabilities without replacing them—empowering your staff for success. With our foundational involvement in NIL and exclusive focus on universities, we provide end-to-end support and collaborative expertise to craft winning strategies tailored for your institution.

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