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Will student-athletes have to pay taxes on scholarships? Under Sen. Richard Burr's bill, some would.
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Will student-athletes have to pay taxes on scholarships? Under Sen. Richard Burr's bill, some would.

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U.S. Sen. Richard Burr has followed through on an unpopular pledge, introducing legislation Wednesday that would require college student-athletes to pay taxes on their scholarships if they make more than $20,000 in outside endorsements.

Burr said the the NIL Scholarship Tax Act is needed “to protect the integrity of amateur athletics at colleges and universities across the nation.”

In November 2019, the NCAA Board of Governors unanimously voted to allow athletes to sell their names, image and likeness, or NIL.

According to a Sept. 1 ESPN report, NCAA rules only prohibit a school or its employees from paying an athlete directly for his or her NIL rights.

Burr, a former football player at Wake Forest University in the mid-1970s, responded to the NCAA decision in November 2019 by tweeting that “if college athletes are going to make money off their likenesses while in school, their scholarships should be treated like income.”

“I’ll be introducing legislation that subjects scholarships given to athletes who choose to ‘cash in’ to income taxes.”

Critics of Burr’s proposal have said that following his logic, any student who makes extra money on the side — say, a musician or a dancer or a chemist — should have his or her scholarship money taxed as well.

The reaction to Burr’s tweet was swift and severe, the Journal reported at the time, with about 6,000 critical replies — from the left and right — flooding Burr’s Twitter feed.

The Charlotte Observer reported Thursday, citing Opendorse, that football players represent 38% of student-athletes with NIL contacts, along with 60% of the total compensation amounts.

Women’s volleyball players were second in both categories, followed by men’s basketball and women’s basketball.

Different paths

Since 2019, nearly 30 states — though not North Carolina — have taken action, either through executive order or enactment of legislation, to allow student-athletes to earn outside NIL income.

Three N.C. Senate Democrats, including Paul Lowe of Forsyth County, introduced an NIL-focused Senate Bill 324 on March 18. The bill has not been addressed in committee.

Conferences and universities can establish NIL regulations in states without such legislation.

Some universities, including UNC Chapel Hill, Alabama, Ohio State and Texas, have contracted with Brandr, which organizes permissible group-licensing opportunities for athletes at those schools.

John Currie, Wake Forest’s athletics director, told the Journal in July that he doesn’t feel the lack of an NIL law in North Carolina puts schools at a disadvantage.

However, Currie does feel a need for uniformity, to avoid situations where multiple states’ NIL jurisdictions are brought into play about what is and isn’t allowed for student-athletes.

Wake Forest’s athletics department partners with Opendorse, along with its “STRIDE” program, an effort to streamline both education and compliance as student-athletes navigate their outside ventures. The latter program will use a company named Spry, which was created by soccer alumnus Lyle Adams.

How much money?

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There have been examples nationally of college student-athletes signing five- and six-figure NIL contracts, some reaching as much as $1 million annually.

Among the more local recognizable NIL participants are UNC quarterback Sam Howell and Clemson quarterback D.J. Uiagalelei signing with Bojangles and UNC basketball center Armando Bacot signing with Jimmy’s Famous Seafood.

Under Burr’s bill, student-athletes who earn less than $20,000 from outside compensation would continue to receive their scholarship under the same tax treatment.

However, students who earn more than $20,000 per year would be required to include their scholarship in their adjusted gross income for federal income taxes.

“As one of only two former scholarship athletes serving in the U.S. Senate, I remain concerned that the NCAA’s action ignores the fact that only a handful of revenue generating sports financially support the majority of non-revenue generating sports on college campuses,” Burr said.

“The premise of this bill is simple: if a student chooses to monetize their name, image and likeness based on their connection to their school — in some cases earning them $1 million or more a year — their scholarship should be subject to federal income taxation.

“It’s critical that we help protect the successful collegiate sports model that has provided students with educational and professional opportunities for more than a century.”

The Associated Press has reported that competing NIL-focused bills in Congress and disagreements signal that federal action may not come until 2022, if at all.

“With the variety of state laws adopted across the country, we will continue to work with Congress to develop a solution that will provide clarity on a national level,” NCAA president Mark Emmert said in a statement.

Responses

Former U.S. Rep. Mark Walker, who introduced NIL legislation, tweeted in November 2019 that “if scholarships are income, that makes them employees, not student-athletes.”

“This isn’t about income. It’s about basic rights that every other American has to their own name.”

Walker is running for the Republican nomination for Burr’s seat. Burr announced during his 2016 campaign that he would not run for re-election.

“Given the fact that Sen. Burr is retiring at the end of next year, this issue obviously means more to him than just a way to score political points for re-election,” said Mitch Kokai, senior policy analyst with Libertarian think tank John Locke Foundation.

“Given the political makeup in both his chamber and the U.S. House, it’s unlikely this measure will go anywhere without substantial support from Democrats across the aisle.”

Todd McFall, a sports economist at Wake Forest, said that “two norms are holding tenuously at the moment.”

“The first is that schools aren’t facilitating directly NIL deals, whether that’s out of deference to conference affiliations or fear of reprisal from the NCAA, which, at this point, seems toothless to regulate what might be termed infractions.”

McFall said the second norm is that schools “largely are dictating to players what is acceptable.”

“However, the legality of this situation has become much more tenuous given the National Labor Relations Board’s announcement Wednesday regarding its view of how college athletes should be categorized” as potential employees at private universities.

McFall said he doesn’t see the first norm holding “because a school that can facilitate revenue opportunities for athletes will have a recruiting advantage over competitors that are playing more traditionally.”

“Yesterday’s announcement of the NLRB’s position makes the breaking of this norm even more likely.”

Journal reporter Ethan Joyce contributed to this article.

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