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June 11, 2023 Practice Point

Student Athletes Need to Know the Potential Tax Implications of the Name, Image, Likeness Rules in College Football

Carlos J. Hornbrook

As a college athlete in 1982, I was a member of the LSU football team. I was raised by a single mom. Most of my teammates and I were from lower-to middle-income economic backgrounds. Most of us had no concept of financial planning, and a majority of our family members were clueless as well. If the opportunity for payments for the use of our names, images, and likenesses (NIL) had been in place at the time, most of us had no financial planning experience or tax knowledge to enable us to handle the NIL deals. At the time that I was at LSU, LSU and most college football powerhouses did not offer any financial planning to their football team members.

Fast forward to 2023 and some financial planning is offered to most of today’s college athletes and their families. A significant part of financial planning is learning about applicable tax provisions, yet athletics programs currently offer minimal or no tax information. For example, I asked a current LSU football player if the LSU football program provides tax information. The LSU player indicated he had only received a few pamphlets on federal and state income taxes. States are, however, beginning to recognize the need for financial planning and tax education, and state education agencies may begin exercising a more active role in these matters.

The Current NIL Environment

College football programs have become an arms race. Colleges are spending substantial sums on coaches’ salaries and state-of-the-art facilities, while various independent entities—often funded by boosters with monies that would otherwise have been given to the schools directly—are supporting NIL deals for athletes. For example, Kirby Smart is one of the highest paid NCAA football coaches with a yearly salary of $11.25 million. Based on available information and estimates, sports media rank the Oregon Ducks as having the best-rated football facility at a cost of $68 million, and LSU as having a state-of-the-art football facility at a cost of $28 million.

Media coverage of NIL deals with athletes provides some sense of the NIL amounts involved. For example, LSU quarterback Garrett Nussmeier’s NIL deal with Cheez-It provided a “Feeling the Cheeziest” hotel room for the Citrus Bowl. Media reports state that attorney Gordon McKernan spent between $750,000 to $1,000,000 in one season on NIL deals with fifteen LSU football players. Several University of Oregon donors have established Division Street Associates, LLC to help guide the University of Oregon’s student athletes through the NIL marketing maze. Division Street has helped secure a deal with Airbnb in which Oregon’s student athletes help design bungalows and will earn NIL money by serving as Airbnb hosts.

All NIL deals may not have happy endings. For example, star quarterback recruit Jaden Rashada filed with the NCAA and was released from his signed National Letter of Intent with the University of Florida after a $13.85 million NIL deal fell through. Similarly, deals like the Airbnb NIL deal arranged by Division Street could potentially create long-term liability problems if the student athletes hosting the rentals do not learn about the possibility of forming an LLC to protect their assets in cases of liability for renter injuries. Some of these student athletes may become professionals who earn millions, and this type of liability could put their future assets at risk. NIL deals that pay athletes to stay in school rather than leave to join the NFL may result in athletes in late-round projections not understanding the time value of money and thus giving inadequate consideration to the long-term consequences of delaying their professional careers.

Possible Tax Consequences of NIL Deals

Students often depend on their teams for advice about handling personal matters, but neither schools nor students are required to submit NIL licensing agreements to the NCAA for review. As a result, there is no NCAA department specifically tasked with reviewing NIL agreements or ensuring that students receive financial and tax information courses to help them plan their personal affairs. (The NCAA does, however, employ staff who enforce the NCAA’s rules related to NIL licensing, so NCAA staff investigating a rules infraction will request copies of NIL agreements for review as a part of the investigation to determine whether an infraction has occurred.) There are, needless to say, a number of tax matters about which it would be helpful for student athletes with NIL deals to receive basic information through a financial planning and tax information course.

1. Responsibility for Federal and State Taxes

Form 1099 Reporting of Income

Student athletes who license their NIL receive royalties from the licenses that are reported on Form 1099-MISCs. Some student athletes, such as the Oregon Ducks students who host Airbnbs, may receive nonemployee contractor NIL income that is reported on a Form 1099-NEC. There generally will be no tax withheld or reported on those forms.

Itemization or Standard Deduction

Consider the NIL deals that Gordan McKernan signed with fifteen LSU football players. It is unlikely that those players each received the same amount because athletes play different positions and have different levels of public recognition. Let’s assume a single (unmarried) player receives $46,000 for an NIL licensing deal. He would receive a Form 1099-MISC for those royalties, with no taxes withheld. The standard deduction for a single taxpayer who did not itemize was $12,950 in 2022 (increasing to $13,850 for 2023). If the student athlete’s itemized deduction exceeds that standard amount, then the student athlete should be aware of the benefit of itemizing.

Kiddie Tax

Student athletes should also be aware of the so-called “Kiddie Tax” set forth in section 1(g). This provision was enacted to prevent parents from shifting income-producing investments to a child’s name to take advantage of the child’s lower tax rate: a child’s unearned income above a certain threshold for those covered by the provision is taxed at the parent’s marginal rate rather than at the child’s (presumably lower) tax rate.

The Kiddie Tax applies to minors who have not attained the age of 18 before the close of the taxable year or—of particular interest here—to full-time students under age 24 whose earned income does not exceed half of their annual support expenses. Royalties from licensing NILs will be treated as unearned income for student athletes unless they are received as part of a trade or business, while non-employee contract work will be treated as earned income. Many student athletes may be under the age of 24 and not have earned income in excess of half of their expenses. Accordingly, student athletes, especially those from higher-income families, should not overlook potential applicability of this provision.

Social Security, Medicare, Section 199A and State/Local Taxes

Student athletes with income from NIL deals will have to contend with a full range of federal, state, and sometimes local municipal income taxes. For example, federal taxes include not only the regular income tax but also the self-employment taxes for Social Security and Medicare at 15.3 percent. Some students who receive NIL deals may also qualify for the section 199A deduction. Taking these taxes into consideration for the hypothetical single LSU student athlete who earned $46,000 in NIL income in 2022 (assuming the student qualifies for the section 199A deduction, but rather unrealistically assuming no other income or expenses for 2022), that student would pay a total of $9,140 in federal taxes and $1,235 in Louisiana state income taxes.

2. Gifts

Indiana University basketball player Anthony Leal used some of his NIL proceeds to pay off his sister’s student loan. He would, of course, have to pay income tax on the income earned from the NIL deal. If the gift to his sister was not structured correctly, he would also owe gift taxes or reduce his lifetime exemption amount, if the payoff of the student loan for his sister was more than $16,000 for the year 2022 ($17,000 for the year 2023). Anthony would also have to file a form 709 with the IRS if the gift exceeded the annual exclusion threshold. Fortunately for Leal, he informed me that he had good financial advice that allowed him to structure the gift properly.

3. Retirement

Well-informed student athletes may decide to set up a SEP IRA—both to reduce their tax liability and to save for retirement. For example, investing $5,000 in a SEP IRA would have saved our hypothetical single student athlete (again assuming no other income or expenses or credits) $765 in income taxes in 2022. If invested properly, the $5,000 investment at age 18 could have a value of $529,123 when the student athlete reaches the age of 60.

4. Estate Planning

Estate planning is another issue worth consideration by student athletes. For example, although young people do not ordinarily think about the need for wills, student athletes with NIL deals should consider the importance of writing a will to allocate their assets. Students will also need to know what state laws apply to them if they die intestate. In Louisiana, for example, the state succession laws dictate how an intestate student athletes’ property will be distributed. There is also a forced heirship provision that would apply to a deceased student athlete’s minor child. If student athletes are married and/or have children, they should also know about the possibility of setting up a trust, especially if their NIL deal is substantial.

5. Nonpayment of Taxes

Conversations with several current student athletes about NIL deals and their expected expenditures were revealing. When asked what they would do if they spent all their NIL money and did not have funds with which to pay their tax liabilities, some replied that they would ask their parents for help. The most common reply, however, was that they would not file any tax return. These student athletes with whom I spoke appeared oblivious to the potential consequences that they could incur for failing to file tax returns or failing to pay federal taxes due. The most likely would be interest and civil penalties under section 6651, though in particularly egregious cases, criminal charges could theoretically apply. State consequences are also important. For example, driving privileges can be lost in Louisiana if a student athlete owes more than $1,000 in Louisiana state income tax. The loss of driving privileges could lead to a litany of other legal problems.


Major athletic programs make millions of dollars because of these student athletes, yet some programs still provide minimal financial and tax education for those athletes. This is a significant problem. Some state laws now offer provisions that govern NIL programs and require some financial planning courses. Louisiana’s law, enacted in July 2022, provides various NIL program restrictions applicable to both universities and athletes: it includes a requirement for a five-hour “financial literacy and life skills workshop” at the beginning of an intercollegiate athlete’s first and third years. Florida’s HB 7-B, passed in February of this year, requires financial literacy courses for student athletes. All states should consider enacting at least these minimal educational requirements for student athletes around NIL earnings. In states without such educational requirements, major athletic programs should work together to create a model educational and guidance program about NILs for the benefit of student athletes.

    Carlos J. Hornbrook

    Hornbrook Law and Real Estate, New Orleans, LA

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