August 14, 2022

College Athlete Taxes After NCAA v. Alstom

Andrew Dana, Partner at Parker Poe Adams & Bernstein LLP, discusses Supreme Court case NCAA v. Alston; name, image and portrait rights; and how the two affect taxes for college athletes.
This transcript has been edited for length and clarity.
David D. Stewart: Welcome to the podcast. I’m David Stewart, editor-in-chief of Tax Notes Today International. This week: taxing student athletes?
In June, the Supreme Court resolved an issue that had been debated for many years in the world of college sports: the salary of college athletes. The court’s decision in National Collegiate Athletic Association v. Alston upheld the lower court’s decision that the NCAA’s restrictions on athletes’ compensation violated antitrust laws.
What tax impact does this decision have on college athletes? How does this decision affect the tax community? Here to talk more about this is the tax notes contributing editor Robert Goulder (Robert Goulder). Bob, welcome back to the podcast.
Robert Gould: Hi, Dave. thanks for your invitation.
David D. Stewart: Let’s start with the current NCAA college athlete compensation rules.
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Robert Goulder: Of course. Many people will be familiar with these because they have been widely discussed in the media. The NCAA has a long-term rule that restricts the form and amount of financial consideration paid to college athletes. The main point of these rules is to allow athletes to receive academic scholarships that include tuition, food and accommodation, as well as a small amount of textbook allowances, and nothing else. Of course they cannot be paid. Chapter
Stewart: What is some background on this Supreme Court case? What does this mean for college sports and the tax world?
Robert Goulder: I think this is very important to all of these groups. This case is because some current and former athletes questioned the NCAA for allegedly violating Section 1 of the Sherman Act.
I know that tax officials may not spend a lot of time considering the Sherman Act, but this is part of the nation’s federal regulatory system on antitrust and fair competition practices. An important part of this is when a group with monopoly power decides to keep wages below market levels.
Essentially, what the plaintiff said in this lawsuit was that the NCAA unfairly used its position as monopoly power to suppress wages.
David D. Stewart: Now, I also understand that some states have been passing laws that allow athletes to use their portraits. Can you talk about that?
Robert Goulder: There are many activities in this field. This is the so-called NIL problem. NIL stands for name, image and portrait. Basically, this has to do with athletes going out and earning money through commercial sponsorship.
Please note that the nuance here is that when athletes are compensated for their NIL rights, the payment does not come from the university or sports department where they participated in the competition. It comes from a completely independent third party. This is a company with a marketing budget, thinking that they can promote their name or brand by letting some student athletes become their salespeople.
This was once prohibited, but since July 1, many states across the country have passed specifically authorized laws.
David D. Stewart: You recently spoke to someone about this. Can you tell me about your guest? What did you talk about?
Robert Goulder: We have an excellent guest to participate in this discussion. His name is Andrew Dana and he works at Parker Poe Adams & Bernstein LLP. Andrew is the team leader of the company’s sports and entertainment industry and has a good understanding of all these topics.
As you listen to our conversation, let us learn more about NCAA v. Alstom. This includes questions from the defendant, which basically says, “Hey look, our amateur brand is on trial here. Why can’t we just play amateur sports and continue to follow these rules? Yes, it turns out they suppress salaries, but that’s because Leisure activities are at stake. ”
This is a very delicate conversation. But these questions are very interesting, not only for sports fans, but also for the average person.
David D. Stewart: Okay. Let’s go to the interview.
Robert Gould: Andrew Dana, welcome to the podcast. Thank you very much for joining us.
Let’s go directly to the first question. The Supreme Court came out in NCAA v. Alstom in June. This is a landmark decision. He vetoed certain NCAA restrictions on athlete compensation, but seemed to make others stand. My sentiment is mainly due to the plaintiff’s decision not to take the matter as far as possible. Can you tell me your general opinion on the substance of this decision?
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The front of the US Supreme Court building in Washington, DC. GETTY
Andrew Dana: You’re right. The plaintiff didn’t push, but after reading the decision, especially the consent form, they may want to have it. When they first came to district court, they challenged the NCAA’s limitations on compensation in all respects.
The judge’s work there identified restrictions on the provision of educational benefits to athletes as problematic. Therefore, the appeal was confirmed by the Ninth Circuit Court. NCAA appeals claims to provide educational benefits

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