Arkansas Gov. Sarah Huckabee Sanders signs bill into law exempting NIL dollars from state income tax

As states across the country drafted bills to exempt NIL dollars from state income tax, one is now signed into law. Arkansas Gov. Sarah Huckabee Sanders signed the transformative bill Friday.

Under the law – which amended the Arkansas Student-Athlete Publicity Rights Act – funds related to NIL or revenue-sharing directly from a university will be exempt from state income tax. Additionally, the bill states financial information related to payments to athletes will be confidential and not subject to the Freedom of Information Act.

The bill was filed March 31 in the Arkansas House of Representatives and passed both the House and Senate April 14. Friday, Sanders signed it into law, and it is retroactive to Jan. 1, 2025. Arkansas has a state income tax of up to 3.9%.

“Income received by a student-athlete from an institution of higher education as compensation for the use of his or her name, image, or likeness or as a percentage of institutional athletic revenue permitted by the institution of higher education’s governing athletic association or conference under this subchapter is exempt from state income tax,” the law states.

The amendment of Arkansas’ law also paves the way for schools in the state to directly pay athletes through NIL, which aligns with the proposed House v. NCAA settlement. However, Judge Claudia Wilken said she planned to deny final approval of the agreement if the verbiage around roster limits didn’t change. She gave the two sides two weeks to amend the settlement before she officially denied it and set trial dates.

Arkansas was one of a handful of states with bills looking to exempt NIL dollars from income tax. Alabama, Louisiana and Georgia were among those in the South to do so, and Illinois saw a similar bill emerge in its state legislature. Arkansas is believed to be the first state to sign such a bill into law.

Georgia was the first state to file such such a bill, doing so Feb. 4 in the state senate. Alabama state representative Joe Lovvorn (R) then followed suit eight days later Feb. 12, and Illinois state representative Travis Weaver (R) filed one in his state Feb. 25.