College athletics sees increase in non-profit paying players

The new world of college athletes being paid for endorsements has created a rapidly expanding, short-lived industry: brand new nonprofit “collectives” that pay athletes to promote charities.

The collectives are presented as feel-good partnerships, but they also raise questions. Is their mission to support charities and their communities or do they exist primarily to funnel money to athletes – in some cases tens of thousands of dollars – and give a school’s donors a delicious tax break ?

“That’s the ultimate question,” said Brian Mittendorf, an Ohio State accounting professor who specializes in nonprofits. His school is one of dozens across the country with affiliated nonprofit collectives setting up athletes with agreements to work with charities.

“We are definitely in gray areas on this. Does it exist to benefit the public through charity, or does it exist to benefit athletes?” Mittendorf said. “My flaw in this regard is skepticism.

There is enough skepticism that a bipartisan effort in Congress has been launched to try to limit the tax deductions that would be available to fundraising nonprofit NIL collectives. A bill tabled this week by the senses. John Thune, a Republican from South Dakota, and Ben Cardin, a Democrat from Maryland, would eliminate the tax deduction for individuals and for specific contributions that are then paid to athletes for name, image and likeness deals.

Thune and Cardin said they don’t want to prevent athletes from signing so-called NIL agreements.

“We also have an obligation to protect taxpayer funds, which means charitable deductions should be reserved for charitable activities,” Cardin said. “Deliberately blurring the line between private spending and charitable contributions dilutes both of these efforts.”

The new entities often exist right next to for-profit collectives that pool funds to align athletes with business deals and provide contributor perks such as VIP-level access to athletes.

The number of nonprofits supporting athletes appears to be growing, with at least two dozen in place and more launched almost every week. They were born out of the massive change that hit college sports in 2021 when athletes were allowed to earn money in ways that had been forbidden for decades.

Among the first was Horns With Heart, a nonprofit created for offensive linemen at the University of Texas. It was launched in December 2021 just before National Football Rookie Signing Day as coach Steve Sarkisian tried to land a highly rated recruiting class.

Horns With Heart caused an immediate uproar with a pledge of $50,000 a year for each scholarship offensive lineman. Critics said it pushed the boundaries of the NCAA’s ban on “play for pay” deals, but that was just the beginning. In April, Texas rival Oklahoma had the nonprofit organization 1Oklahoma promising Sooners football players up to $50,000 a year for work supporting charities.

Horns With Heart founder Rob Blair says there is no gray area in his organization’s mission: to help gamers make money and help charities tap into the power of people. local stars to raise their profile.

“Our intention all along,” Blair said, “was to accomplish both tasks.”

Horns With Heart now has all Longhorns offensive linemen signed for their first $50,000, Blair said. The work they are expected to do for charities may include social media promotions, in-person appearances at events, and public service announcements.

The group announced partnerships with a children’s hospital, a support group for active military and veterans, football camps and a foundation led by former Longhorns and NFL linebacker Derrick Johnson to remodel and update school libraries.

“In life, everyone is looking for win-win scenarios,” Blair said. “We want to show the world that NIL can be used to have a real positive impact for everyone.”

Blake Lawrence, chief executive of Opendorse, a company that partners with dozens of schools to help initiate, track and monitor NIL agreements, noted that boosters are used to getting tax dedications for their donations to foundations. from the athletic department. Many, he said, made it clear that they would not transfer this money to NIL collectives without a similar return on investment.

“It’s not the only reason, but the main reason is that the biggest contributors to collectives ask that their contributions be tax deductible,” he said. “And that’s only possible if the collective has 501(c)(3) status.”

Mit Winter, a sports law attorney in Kansas City, Missouri, who has tracked issues in the college athlete market, agreed. He said nonprofits might be able to attract savvy, larger donors who want something even more valuable: the tax deduction than Sens. Coin and Cardin try to eliminate.

“They have a history of donating to universities, which are nonprofits,” Winter said. “And they’re used to getting something in return.”

Thilo Kunkel, director of Temple’s Sports Industry Research Center, wondered how nonprofits could put a monetary value on an athlete’s efforts on behalf of a charity that could go from something as simple as a tweet to a visit with sick children to meal delivery. to the elderly.

He also noted that in some cases, a star athlete showing up at an event has an impact that cannot be measured, certainly not in dollars or cents. A win-win? It’s possible, Kunkel said.

“So now we’re saying, ‘Yeah, we’ll give you $5,000. But you have to show up to this kids’ boot camp and then give a pep talk ‘disguised as a charity act,'” Kunkel said. So they’ll be running a camp for the inner city kids, but it’s basically just a way for them to pay to pay the kids running the camp. I guess the kids, the inner city kids still benefit. They always benefit from it. So the inner city kids still have access to the athlete. And they always have the motivation.”

In Kansas, a group of Jayhawks basketball players were paid to attend a fundraising event for a group that fights homelessness. Players ended up contributing $17,000 of their own money.

“I think people were surprised,” player Jalen Wilson, who donated $5,000 that night, told the Lawrence Journal-World. “I just felt the need to do it and if I have it or if I can help I will do it every time.”

Whether these nonprofits are simply means of payment for athletes could be clarified in the documents they will have to file with the federal government in the months and years to come. They are public records and charitable watchdog groups also pay attention.

Ultimately, the market will determine the future of nonprofits if donors decide their money could be better spent elsewhere, Lawrence said. For now, donors may feel like they’re helping their favorite teams and charities do their jobs at the same time.

“There’s something good about seeing a student athlete interact with kids versus seeing a student athlete promoting a Mercedes or a BMW or an expensive sports car, isn’t there? not?” said Lawrence.

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This story was originally published September 30, 2022 12:51 p.m.