The IRS is set to target NIL collectives that claim 501(c)(3) charity status according to a report that emerged on Saturday.
Chris Vannini of The Athletic reported on Saturday that the IRS plans to look into collectives which claim this nonprofit status. There is concern because of the fact that the collectives, which claim charity, are being funneled to the athletes, not for charity.
Vannini tweeted that a memo stated, “In many circumstances, the compensation for NIL activities arranged for or facilitated by the nonprofit NIL collective is the very justification for the organization’s existence.”
The IRS is taking aim at NIL collectives that claim 501(c)(3) charity status.
A new memo states: "In many circumstances, the compensation for NIL activities arranged for or facilitated by the nonprofit NIL collective is the very justification for the organization’s existence."
— Chris Vannini (@ChrisVannini) June 10, 2023
Regulations like these are both expected and anticipated now that these forays are being explored. While it’s not necessarily wrong to use the collectives to funnel money to athletes, claiming nonprofit chairty status and then funneling the money to the athletes is the problem.
NIL obviously has many benefits, but they will almost certainly run into an issue if the collectives continue to be run like this. It sounds like the government is a few steps away from intervening. Nick Saban and Brian Kelly have already spent time with legislators about NIL as well, so the wheels are spinning.
The hope here is that it’s snuffed out and then compromised without the student-athletes being significantly affected. It’s not their fault that the collectives are run this way, obviously. But we’ll see how far into fruition we go with this, too.
