Is the Florida Collective a 501-C Organization eligible for tax exempt donations? IRS is cracking down on this framework. It would be great if the Florida Collective was broad enough to escape the scrutiny of the IRS. This would strengthen our ability to obtain "heavy hitter donors": The IRS’s Latest Play on NIL Collectives: Tax-Exempt Status on the Defensive | News & Insights | Alston & Bird
The IRS has already come down with a statement saying donations to NIL collectives will not be tax exempt. From the article: Chief counsel for the IRS concluded in AM 2023-004 that many NIL collectives do not qualify as tax-exempt under Section 501(c)(3) because they operate primarily to benefit the private interests of student-athletes rather than a charitable cause, calling into question the future tax treatment of these organizations.
IF this entity is the same as the Florida Victorious, LLC set up on Sunbiz (EIN and is 92-3214781) then it has registered as a charity with the FL Dept of Agriculture and Consumer Service and their registration # is: CH70961 Check-A-Charity I could not find them on the IRS tax exempt org search: https://apps.irs.gov/app/eos/
If you work at the structure and actually make the participants participate in charitable/community events and attempt to help and influence young people, it can be construed as a legitimate charitable purpose. This is very important when/if you are courting the big fish like one party, who is currently a very unhappy Harvard alumnus, born in Daytona and raised in Boca, who makes Phil Knight look like a pauper!
"Construe" it all you want, but if the IRS doesn't construe it that way you've got a problem until a federal court rules in your favor.
I think this subject has to be revisited by the entire Congress, because the IRS cannot create tax policy. There has to be a charitable component here.
What I do know is Georgia has mastered the NIL process. I have always thought that if you purchased something you were taxed on that. But in this case the IRS is saying payment to players is taxable. The question I have is what the players receive is taxable?
No, they're saying donations to NIL collectives are not tax deductible. As for the players, I'm assuming they'd have to pay income tax on their money.
Ok so UGA's collective paid for Carson Beck's Lamborghini and Trevor's Audi. The IRS is saying the collective has to pay the tax because it is not a charitable donation. Is the collective paying for insurance, gas, and maintenance as well? All of that is surely taxable.
Why do you think the collective paid for the lambo directly? Even if they did, yes Carson would have to pay taxes on the income if they put the car in his name.
I don't know what shenanigans are going on at UGA, but I'm pretty sure you can't "pay the tax for them" as that would also be taxable income. IDK, maybe there are some tax guys here who disagree, but that would still be income.
Then does the collective have to file a tax return on money that isn't dished out to the athlete yet? Or is it just a pass through and only taxed when it gets to the hands of the athlete?
"charities" are allowed to have a bank account. They don't have to operate at zero with all funds dispersed at all times.
That's not the issue. It isn't what the collective is paying out that is the subject, it is what they are collecting. A 501-C corporation does not pay tax on what it receives in revenue. The collectives are arguing that those donations--their gross revenue- is a charitable contribution, and is thus tax exempt. However, if a 501-C corporation hires employees, businesses, etc. to do work for them, those employees, businesses, etc. are taxed on their earning or revenues from the 501-C corporation. It seems pretty clear that payments to players from collectives are taxable income, regardless if they are tax exempt charitable organizations or not. Let's hope players know that.
I think Florida Victorious has a foundation where you can separately donate. That keeps the charitable cause of the collective in its own tidy division. Go to their website. If you donate to Florida Victorious they don't tell you it's tax exempt. If you go to their foundation page and pledge a donation there, they tell you it is tax exempt.Based on that IRS memorandum, I think that separation is appropriate.
