Washington, July 2: US lawmakers are pushing for reforms to alleviate the tax burden on college athletes. They argue that the rapid rise of Name, Image, and Likeness (NIL) agreements is leaving many young players struggling to navigate the complex tax system without adequate guidance.
During a hearing this week by the House Ways and Means Committee on the multi-billion dollar sports industry, lawmakers from both parties learned that student-athletes, many of whom are teenagers, are earning millions from endorsement deals but often lack awareness of their tax obligations.
Former NFL linebacker and ESPN analyst Sam Acho cited the example of an 18-year-old football player who earned $750,000 through NIL agreements. He bought a house for his mother, acquired a car, and rented an apartment, only to later discover he had about $6,000 left after owing approximately $320,000 in taxes, as no taxes were withheld from his earnings.
Acho stated, “The tax code was not designed for a 17-year-old college football player who suddenly comes into a lot of money.” He urged Congress to consider mandatory tax withholding on NIL payments and improve financial literacy for student-athletes.
Former IRS official Thad Madden explained that college athletes earning from NIL are classified as ‘self-employed independent contractors’ rather than employees. Consequently, they must pay federal income tax, as well as Social Security and Medicare taxes, without automatic deductions. Madden remarked, “This is a significant issue for an 18-year-old just out of high school.”
He noted that many athletes leave college with substantial tax liabilities because they spend their earnings before setting aside money for taxes. Madden argued that mandatory withholding from NIL payments would enhance compliance and prevent young athletes from falling into IRS debt.
Several lawmakers from both parties supported enhancing financial literacy among college athletes. Witnesses indicated that many universities focus primarily on athletic performance rather than educating players about contracts, taxes, and long-term financial planning.
Acho emphasized to lawmakers that “players need advisors, not fans,” arguing that many athletes lack reliable advisors to help them understand contracts, taxes, and investment decisions.
Lawmakers also examined the broader economic implications of the sports industry, including taxpayer-funded stadiums, tax-free municipal bonds, and tax regulations on professional sports franchises. Economists questioned whether the billions in government subsidies for stadium construction provide tangible economic benefits to local communities.
Witnesses noted that foreign students on F-1 visas face additional challenges due to immigration and tax regulations, even as universities increasingly rely on international talent in college sports.
The significance of this debate extends beyond the US. American universities continue to attract a large number of international student-athletes, including those from India. As NIL opportunities expand, Indian players studying in the US may also face the tax and financial planning challenges that US lawmakers are concerned about.
Bhupendra Singh Chundawat is a seasoned technology journalist with over 22 years of experience in the media industry. He specializes in covering the global technology landscape, with a deep focus on manufacturing trends and the geopolitical impact on tech companies. Currently serving as the Editor at Udaipur Kiran, his insights are shaped by decades of hands-on reporting and editorial leadership in the fast-evolving world of technology.