GLAM: Organizations developing NIL opportunities for student-athletes generally will not qualify as tax-exempt
Addressing whether developing paid NIL opportunities for collegiate student-athletes furthers an exempt purpose under section 501(c)(3)
NIL opportunities for student-athletes generally will not qualify as tax-exempt
The IRS today publicly released a generic legal advice memorandum (GLAM)* that addresses whether developing paid name, image, and likeness (NIL) opportunities for collegiate student-athletes furthers an exempt purpose under section 501(c)(3).
The memorandum concludes that an organization that develops paid NIL opportunities for student-athletes will, in many cases, be operating for a substantial nonexempt purpose—serving the private interests of student-athletes—which is more than incidental to any exempt purpose furthered by the activity. Operating for a substantial nonexempt purpose is inconsistent with exempt status under section 501(c)(3).
The memorandum specifically finds that the private benefit to student-athletes:
- Is not a byproduct but is rather a fundamental part of a nonprofit NIL collective’s activities
- Is not a necessary concomitant to the accomplishment of a nonprofit NIL collective’s exempt purpose of promoting the collective or its partner charities
- Is not qualitatively incidental because it is generally directed to a limited noncharitable class
Although not precedential guidance that can be cited by the IRS or charitable organizations, the memorandum is a clear indication of the position the IRS is likely to take both when reviewing new applications for exemption and in examinations of NIL collectives that may have recently received their determination letters.
Read GLAM 2022-004 [PDF 212 KB] (release date of June 9, 2023, and dated May 23, 2023)
For more information, contact a tax professional with KPMG’s Washington National Tax practice:
Ruth Madrigal | email@example.com
Preston Quesenberry | firstname.lastname@example.org
*A generic legal advice memorandum constitutes internal IRS legal advice by the Office of Chief Counsel to assist IRS service personnel in administering their duties. It is not binding law and cannot be used or cited as precedent.
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