The Tax Ramifications Of Name, Image, And Likeness Deals For Student-Athletes

Haley A. Ritter (Orrick, Herrington & Sutcliffe, Irvine, CA), Stars on the Field, Benchwarmers on the Tax Return: Student-Athletes and the Tax Ramifications of Name, Image, and Likeness Deals, 26 Chap. L. Rev. 401 (2022)

With NCAA v. Alston, new state legislation, new NCAA guidance, and potentially new federal legislation, the landscape of financial planning and taxes for student-athletes is turning into a new game entirely. These positive changes have added new burdens to student-athletes’ tax responsibilities, including higher tax payments, more complex calculations, and more record keeping requirements. 

As independent contractors, student-athletes need to pay twice as many employment taxes as employees and will need to pay quarterly estimated payments. They will benefit from being able to deduct certain expenses as ordinary and necessary business expenses; however, this will require thorough record keeping and a determination of the student-athletes’ tax home. Student-athletes could create an LLC to minimize taxes, but this creates more responsibilities for a student-athlete. 

Additionally, for purposes of state taxes, student-athletes must determine the state(s) in which they will be required to file state taxes (which could be multiple states), based on their states of residency, the characterization of their income, and the implication of the jock tax. Because of student-athletes’ young age and lack of experience with taxes, and in light of the complicated tax compliance burden as a result of their newly allowed NIL income, solutions must be implemented to help student-athletes with tax compliance to avoid a host of potential penalties.

The most effective solution is to create a digital platform to educate student-athletes, help keep track of and make recommendations for their finances, aid students in taking steps to minimize their tax burdens (including forming an LLC), and help students with calculating and filing necessary tax documents. Tax support centers staffed with lawyers and accountants, in addition to requiring a course on tax and finance responsibilities, could also help student-athletes avoid penalties for tax compliance errors. By providing student-athletes with the tools, education, and advice they need to legally minimize their taxes and stay on top of filing and payment requirements, we can better protect them from dropping the ball on the compliance of their tax returns.