NCAA president Charlie Baker sides with IRS 'ruling'

NCAA president Charlie Baker is in agreement with the Internal Revenue Service‘s stance on nonprofit collectives and is not ruling out more governance being issued on NIL.

In a 12-page memo released from the office of the IRS Chief Counsel this past Friday, the revenue service believes donations made to nonprofit NIL collectives are not tax-exempt.

Some of the most aggressive collectives have applied and been deemed as 501(c)(3) organizations by the IRS. That does not mean, however, that the IRS has to sign off on their activity. With more than 200 NIL collectives across the Division I landscape, roughly 80 have been deemed as nonprofits.

“In the context of what NIL is supposed to be about and how it is supposed to work and what it is supposed to provide, which is a service for an entity that is basically making what we’d describe as a business expense … yeah, it should be treated as a taxable event,” Baker told Sports Illustrated in an interview at the annual National Association of Collegiate Directors of Athletics in Orlando.

What the impact of the IRS memo is moving forward remains to be seen.

In his conversation with SI, Baker characterized the revenue service’s move as a “ruling.” Friday’s news has sent waves through NIL collective circles, multiple sources have indicated to On3. Some have made the decision to put nonprofit operations on hold, while others have decided to continue with day-to-day operations and brush past the IRS.

Baker on possibility of further NIL guidance

Baker is not letting on up collectives. The president also said the NCAA NIL working group is still exploring a stricter framework surrounding athlete compensation. Speaking at last week’s University of Arizona’s Future of College Sports summit, he said he has been in constant communication with the group.

The president pushed back in interviews last week in Washington, D.C., on what Plan B would look like for the NCAA. Charlie Baker instead referenced “traps” that the governing body could run.

The NCAA has released further guidance in the last 24 months since installing its interim NIL policy. With the two-year anniversary of college athletics’ new era only weeks away, a stricter framework would not be stunning. Baker has spent much time in his new position, however, lobbying Congress for a federal mandate aimed at creating a level NIL playing field.

“We have what I would describe as high-level guidelines out there and one of the things I believe we need to do on our own, while we continue our discussions with Congress, is to create a much clearer framework around NIL,” he told SI.

The SEC may not wait for the NCAA to make a move. Commissioner Greg Sankey continues to explore the idea of coordinating state laws in the conference’s footprint to match. He would have to wait, however, until after football season with many state legislatures wrapping up for the summer.

Meanwhile, new NIL collectives continue to take shape. Texas A&M‘s 12th Man Fund, which typically raises funds for facilities and scholarships, launched the 12th Man+ Fund focused on NIL in February.

Lawmakers in Arkansas, Colorado, Missouri, Montana, New York and Oklahoma have sponsored or passed bills in recent weeks to prevent the NCAA from launching investigations into NIL activities. Texas Gov. Greg Abbott signed the Lone Star State’s into law this past weekend.