NCAA tax status related to athlete image rights under new bill
The National Collegiate Athletic Association would lose its tax-exempt status if it continued its practice of prohibiting student athletes from monitoring or enjoying their own images.
The Student-Athlete Equity Act (HR 1804), introduced on March 14 by U.S. Representative Mark Walker (RN.C.) and co-sponsored by Representative Cedric Richmond (D-La.), Would change part of the Tax Code on the returned. exempting “qualified amateur sports organizations” which direct or develop talent for national and international competitions. This would deprive the NCAA of tax-exempt status if it “substantially restricts” an athlete’s use or benefit of their own name, image or likeness.
It could also force the NCAA to shell out hundreds of millions of dollars in taxes if it doesn’t lift its restrictions on publicity rights.
The legislation is intended to disrupt the NCAA’s practice of forcing student-athletes to give up their publicity rights in order to participate as amateurs, while the association takes advantage, a spokesperson for Walker said. The NCAA earns about $ 1 billion a year in television rights for its only men’s basketball tournament in a deal that runs until 2032. It has faced numerous lawsuits from former and current players as well as public criticism on various fronts regarding their rules of amateurism.
“We think the NCAA knows how to fix the pattern, and this approach can do it,” Walker’s spokesman Jack Minor told Bloomberg Law. “They just don’t have the motivation to do it.”
The change would not cost the NCAA “a single dollar,” Walker said in a March 7 statement announcing his intention to introduce the bill. Adding 34 words to the tax code intentionally gives the NCAA the flexibility to decide how to implement the changes to become compliant, he said.
The NCAA did not immediately respond to a request for comment. The association argued in court that fans would be reluctant to watch whether players were paid, and said changing the system would create unfair competition between schools.
It is complicated
The chances of the bill are far from certain, although Minor has said he has bipartisan support and is on the way to finding additional sponsors.
Still, he acknowledged that some ways of allowing athletes to profit – by appearing in local advertisements, for example – would lead to corruption, as the boosters funnel money to athletes to reward their choice of schools. But he said a variety of recent underground payments scandals – including an FBI investigation into college basketball – suggested “the corruption is happening now.” He said the NCAA could still ban athletes from taking recall money, or put the money in escrow until their eligibility ends.
He also said giving rights to players would help them develop entrepreneurial, marketing and accounting skills, and players other than the big stars would benefit.
But Jeremy Sheff, director of the University of St. John’s Intellectual Property Law Center, said wording in the bill “substantially” prohibiting restricting athlete advertising power makes NCAA’s obligations unclear. . The bill does not address complexities that could hamper compliance, such as disparate state laws governing the newly granted publicity rights of athletes, he said.
Sheff also noted that athletes in professional sports leagues generally collectively negotiate the publicity rights for their in-game images. Student-athletes would either have to unionize to negotiate the terms or individually agree to the terms, which could result in power. considerably uneven negotiation. The distribution of this income, disproportionately generated by men’s sports, could also face complications under Title IX, the federal law prohibiting discrimination on the basis of sex in any program receiving federal funding, he added. .
“It’s very complicated, and it doesn’t look like that level of complexity is contemplated by the bill,” Sheff said. “I am getting the impetus for this bill. It is truly a crime that these student athletes are employees prohibited from being paid for their work. But it’s not clear to me that saying “Let them get sponsorship deals” is a useful way to go. “
Minor said those issues would be up to the NCAA and the courts, noting recent litigation involving efforts to unionize student-athletes and overturn wage restrictions. He also said that a system for athletes to bargain collectively with the NCAA was precisely the goal.
“Aligning them with all the other sports leagues is exactly what we want to do,” Minor said.