Changing The Face of College Sports One Tax Return At a Time

Abstract

On September 30, 2019 California Governor Gavin Newsom signed into law the Fair Pay to Play Act (FPTPA), allowing student-athletes to hire agents and financially benefit from their college sports activities by permitting commercialized use of their name, image, and likeness (NIL). California’s law circumvented the NCAA’s historic injunction on student-athletes receiving compensation outside scholarships; however, after its passage the NCAA reformed its stance to allow student-athletes to profit from the use of their NIL. With the NCAA’s approval, and with numerous states pushing forth similar legislation to that of the FPTPA, the face of college sports is changing. However, as quickly as the NCAA transformed its posture on student-athletes being compensated, the term tax emerged. Once student-athletes earn income under the FPTPA, they must become familiar with complicated tax filing and payment obligations that may result in adverse and unexpected consequences. This article provides a history of the pay-for-play debate in college sports, analyzes the intricacies of the FPTPA, introduces applicable tax considerations at the federal and state levels that may impact student-athletes, and makes recommendations to better educate and protect student-athletes’ financial interests.

Keywords: Fair Pay to Play Act, FPTPA, NCAA, Newsom, Tax, California, pay-to-play, name, image, likeness, NIL, student-athlete, Internal Revenue Code, IRC, Internal Revenue Service, agents, commercialized use, college sports