[82lsju]

Organizations that develop paid name, image, and likeness (NIL) opportunities for collegiate student-athletes (college NIL collectives) in many cases will not be furthering an exempt purpose under Sec. 501©(3), the IRS advised in an Office of Chief Counsel legal memorandum published Friday (AM 2023-004 (5/23/23)). This could significantly affect the landscape of college NIL collectives, because if the collective does not further a Sec. 501©(3) exempt purpose, it will not be a tax-exempt organization under Sec. 501(a) and donations to the collective will not be tax deductible to donors.

Sec. 501©(3) provides exemption under Sec. 501(a) for organizations organized and operated exclusively for one or more of the exempt purposes set forth in section 501©(3). An organization will not be considered operated exclusively for exempt purposes unless it serves a public rather than a private interest. However, an organization may serve both public and private interests if the private benefit is clearly incidental to the overriding public interest.

In AM 2023-004, the IRS Office of the Chief Counsel said the private benefit provided to student athletes by NIL collectives is in many cases far beyond the incidental private benefit that the law allows.

"Nonprofit NIL collectives make compensatory payments to student-athletes in exchange for services and the use of a valuable property right (NIL), which does not further educational purposes under section 501©(3)," the memo said. "Absent a finding that NIL collectives select student-athletes for participation based on need, such that their activities could be considered conducted for the relief of the poor or distressed, and that payments are reasonably calculated to meet that need, payments to the student-athletes are properly regarded as serving private rather than public interests."

https://www.journalofaccountancy.com/new...%2F23%2F23)).

more here

https://www.irs.gov/pub/lanoa/am-2023-004-508v.pdf

[82lsju]

Organizations that develop paid name, image, and likeness (NIL) opportunities for collegiate student-athletes (college NIL collectives) in many cases will not be furthering an exempt purpose under Sec. 501©(3), the IRS advised in an Office of Chief Counsel legal memorandum published Friday (AM 2023-004 (5/23/23)). This could significantly affect the landscape of college NIL collectives, because if the collective does not further a Sec. 501©(3) exempt purpose, it will not be a tax-exempt organization under Sec. 501(a) and donations to the collective will not be tax deductible to donors.

Sec. 501©(3) provides exemption under Sec. 501(a) for organizations organized and operated exclusively for one or more of the exempt purposes set forth in section 501©(3). An organization will not be considered operated exclusively for exempt purposes unless it serves a public rather than a private interest. However, an organization may serve both public and private interests if the private benefit is clearly incidental to the overriding public interest.

In AM 2023-004, the IRS Office of the Chief Counsel said the private benefit provided to student athletes by NIL collectives is in many cases far beyond the incidental private benefit that the law allows.

"Nonprofit NIL collectives make compensatory payments to student-athletes in exchange for services and the use of a valuable property right (NIL), which does not further educational purposes under section 501©(3)," the memo said. "Absent a finding that NIL collectives select student-athletes for participation based on need, such that their activities could be considered conducted for the relief of the poor or distressed, and that payments are reasonably calculated to meet that need, payments to the student-athletes are properly regarded as serving private rather than public interests."

https://www.journalofaccountancy.com/new...%2F23%2F23)).

more here

https://www.irs.gov/pub/lanoa/am-2023-004-508v.pdf