IRS: Nonprofit NIL collectives are not tax exempt

In news that “could rock the world” of NIL, the IRS “suggests that nonprofit NIL collectives offering tax deductions could be breaking the law.” According to a memo, “donations made to nonprofit NIL collectives ‘are not tax exempt’” because the benefits they provide college athletes are “not incidental both qualitatively and quantitatively to any exempt purpose.” The news “could have a resounding impact in the collective space,” where booster-led groups are “pooling donations to distribute to college athletes through NIL deals.” More than 200 collectives exist among the 131 FBS schools, “dozens of which have been granted 501(c)(3) status and are receiving millions in donations from boosters” who are under the impression “that their gifts fall under tax deduction.” It is “unclear what happens now” ( SI, 6/10 ).