As more donor groups have formed name, image and likeness (NIL) collectives as not for profit entities, the Internal Revenue Service (IRS) recently released guidance that effectively puts the brakes on the ability of these entities to collect tax-deductible donations from supporters. This guidance also raises compliance concerns for NIL collectives and possibly other charities.

History of NIL Collectives in College Sports

A college athlete is permitted to be compensated for the use of the athlete’s name, image and likeness due to the NCAA’s adoption of its NIL policy in 2021. Following this policy, special types of entities referred to as “NIL collectives” have been formed in order to facilitate payments to athletes as well as strengthen bonds of the alumni fan base to a particular university. An NIL collective is an entity that receives contributions from donors and then uses those contributions to pay an athlete in exchange for the use of the athlete’s name, image and/or likeness in various types of activities.