Just thinking about opt-in and NIL

[mthoopsfan]

I assume that unrestricted donations to UM athletics and the Foundation can be used to cover various athletic expenses and thus free up other funds to pay athletes, i.e. revenue-sharing. If I'm right, this means that donations to athletics/Foundation would be tax deductible as a donation for those who are itemizing, even though they weren't when donated to NIL. This would be a good reason to opt-in. It effectively converts non-deductible NIL donations to tax deductible donations. I assume there's nothing about the new revenue-sharing being from net revenues, only from revenues.

 

[AZDoc]

I assume that unrestricted donations to UM athletics and the Foundation can be used to cover various athletic expenses and thus free up other funds to pay athletes, i.e. revenue-sharing. If I'm right, this means that donations to athletics/Foundation would be tax deductible as a donation for those who are itemizing, even though they weren't when donated to NIL. This would be a good reason to opt-in. It effectively converts non-deductible NIL donations to tax deductible donations. I assume there's nothing about the new revenue-sharing being from net revenues, only from revenues.

Great point. Definitely worth getting that clarified.

 

[BWahlberg]

My good buddy Chatgpt says this:

University Foundation Donations: Potentially Tax-Deductible​

• If a donation is made to the University of Montana Foundation (or a comparable 501(c)(3) university-affiliated entity), and those funds are used for general athletics support (including the now-permissible revenue-sharing under House), then:
  

  Yes, that donation is likely tax-deductible if the donor itemizes and receives no tangible benefits in return.

• The IRS allows deductions for donations to qualified charities under IRC §170, provided:
  • The donor does not receive goods or services in exchange,
  • The funds are not earmarked for a specific athlete (which would violate quid pro quo rules),
  • The donation is not routed through a for-profit NIL agency.
• The key distinction is intent and control:
  • If the university controls the funds, uses them to support the department (including athlete compensation as allowed under House), and it's processed through the 501(c)(3), it's likely deductible.
  • Example: Giving $25,000 to the Grizzly Athletics Excellence Fund through the UM Foundation for "football operations" could now also mean supporting athlete payments via the new revenue-sharing caps.

---

Independent NIL Collectives: Generally Not Tax-Deductible​

• Donations to independent collectives like the original Good Ol’ Grizzlies Collective, if they are not structured as a 501(c)(3) or fail IRS scrutiny under private benefit doctrine, are not tax-deductible.
• Most NIL collectives that pay athletes directly for appearances, marketing, or other services do not qualify as charitable orgs under IRS rules. The IRS made this clear in Memo AM 2023-004, warning collectives not to assume 501(c)(3) status applies to most NIL payment schemes.
• A few NIL collectives tried to form charitable arms (e.g., working with charities in exchange for athlete appearances), but the IRS has been cracking down.

---

So What's Changed Post-House?​

• Before: Giving to a school's foundation couldn’t be used to pay athletes. NIL was entirely separate and almost always non-deductible.
• Now: If a school like UM opts in to House, its foundation can legally use donations to fund athlete revenue-sharing, within caps. That means:
  • Donors can support athlete compensation through tax-deductible gifts.
  • It’s a massive shift in how fundraising may be structured for athletics departments.

---

Summary Table​

Donation Type	Tax-Deductible?	Can Fund Athlete Pay?	Key Restrictions
UM Foundation (501(c)(3))	Yes (if no benefit)	Yes (under House)	Cannot earmark for specific athletes; must be within revenue-sharing cap
Independent NIL Collective (non-501(c)(3))	No	Yes (direct NIL deals)	Payment must be for services; no tax benefit
NIL Collective with 501(c)(3) status	Possibly*	Yes (charitable appearances)	Heavily scrutinized by IRS; must prove charitable purpose and no private benefit

 

[mthoopsfan]

My good buddy Chatgpt says this:

University Foundation Donations: Potentially Tax-Deductible​

• If a donation is made to the University of Montana Foundation (or a comparable 501(c)(3) university-affiliated entity), and those funds are used for general athletics support (including the now-permissible revenue-sharing under House), then:
• The IRS allows deductions for donations to qualified charities under IRC §170, provided:
  • The donor does not receive goods or services in exchange,
  • The funds are not earmarked for a specific athlete (which would violate quid pro quo rules),
  • The donation is not routed through a for-profit NIL agency.
• The key distinction is intent and control:
  • If the university controls the funds, uses them to support the department (including athlete compensation as allowed under House), and it's processed through the 501(c)(3), it's likely deductible.
  • Example: Giving $25,000 to the Grizzly Athletics Excellence Fund through the UM Foundation for "football operations" could now also mean supporting athlete payments via the new revenue-sharing caps.

---

Independent NIL Collectives: Generally Not Tax-Deductible​

• Donations to independent collectives like the original Good Ol’ Grizzlies Collective, if they are not structured as a 501(c)(3) or fail IRS scrutiny under private benefit doctrine, are not tax-deductible.
• Most NIL collectives that pay athletes directly for appearances, marketing, or other services do not qualify as charitable orgs under IRS rules. The IRS made this clear in Memo AM 2023-004, warning collectives not to assume 501(c)(3) status applies to most NIL payment schemes.
• A few NIL collectives tried to form charitable arms (e.g., working with charities in exchange for athlete appearances), but the IRS has been cracking down.

---

So What's Changed Post-House?​

• Before: Giving to a school's foundation couldn’t be used to pay athletes. NIL was entirely separate and almost always non-deductible.
• Now: If a school like UM opts in to House, its foundation can legally use donations to fund athlete revenue-sharing, within caps. That means:
  • Donors can support athlete compensation through tax-deductible gifts.
  • It’s a massive shift in how fundraising may be structured for athletics departments.

---

Summary Table​

Donation Type	Tax-Deductible?	Can Fund Athlete Pay?	Key Restrictions
UM Foundation (501(c)(3))	Yes (if no benefit)	Yes (under House)	Cannot earmark for specific athletes; must be within revenue-sharing cap
Independent NIL Collective (non-501(c)(3))	No	Yes (direct NIL deals)	Payment must be for services; no tax benefit
NIL Collective with 501(c)(3) status	Possibly*	Yes (charitable appearances)	Heavily scrutinized by IRS; must prove charitable purpose and no private benefit

Thanks. There it is. I finally found a good reason to opt in.