July 14, 2026
Andrew Wilford
Director of State Policy
National Taxpayers Union Foundation
Comment for the Record to the House Ways and Means Committee
Chairman Smith, Ranking Member Neal, and Members of the Committee,
On behalf of National Taxpayers Union Foundation (NTUF), we write with comments on the growing issue of uncertainty and confusion surrounding the tax obligations faced by college athletes. We thank you for bringing attention to this issue by holding this hearing.
For nearly five decades, NTUF has striven to give policymakers the tools to make informed, pro-taxpayer policy choices. We study the tax and fiscal policies that make states more competitive, as well as the ways that overlapping state tax jurisdictions can create burdensome compliance challenges for taxpayers.
Name, Image, and Likeness (NIL) income, particularly within the context of college athletics, implicates both state competitiveness and multistate tax compliance burdens. Tax guidance remains murky at both the state and federal levels, leaving 18-year-olds filing their taxes for the first time to try to figure out their tax obligations on their own.
Straightforward federal actions can greatly limit these compliance burdens:
- Federal standards on classifying and sourcing different forms of NIL income, for college athletes as well as other public figures, would help immensely in transforming NIL income taxation from an ad hoc process to a streamlined one. A standard set by Congress need not be a mandate—many states would automatically conform, and would serve as a unifying guideline for those that would not. Specifically, Congress should make clear that licensing-based NIL is not wage compensation.
- Limit multistate exposure with mobile workforce rules that would protect certain individuals (such as mobile employees as well as independent contractors like college athletes) from having to understand complicated state tax filing and income apportionment schemes until they had spent more than a trivial amount of time in a state. Determining when and where to pay tax on NIL is currently a task fit only for the most seasoned CPA specializing in multistate tax, yet it is being foisted upon 18-year-old college students.
- Pre-empt state imposition of retaliatory “jock taxes” on college athletes. States may attempt to tax visiting athletes playing games in their state, either improperly via reinterpreting existing statutes or by amending their current laws governing taxation of nonresident athletes and entertainers. Clarifying that states may not assess tax obligations on college-enrolled athletes based on the time they spent playing games in that state would not preempt any existing state policies, but would prevent them from popping up in the future.
Background: Types of NIL Income
Before getting into the problems faced by NIL income earners, it is important to recognize that NIL is neither new nor exclusive to college athletes. “NIL” is simply the monetization of one’s recognizable public image, whether earned by an athlete, social media influencer, celebrity, or any other individual.
This fact carries with it a note of caution: policymakers should be careful, when delving into the tax treatment of college athletes’ NIL, not to create a tax system for college athletes that treats their NIL income differently from that of other taxpayers who earn NIL income. Whether one’s NIL is valuable because they play football on Friday, Saturday, Sunday, or not at all, the tax treatment of their income should remain broadly the same.
With that said, the topic of today’s hearing is college athletes’ NIL income. College athletes’ NIL compensation generally falls into one of three separate categories:
- “Traditional” NIL: The form of NIL compensation that predates college athletics. A brand or business compensates a public figure for appearing in commercials, visibly using its products, appearing at public events on its behalf, posting about its products on social media, or for the use of their NIL in a video game. The unifying theme is that these transactions are market-driven, with the brand’s motivation being to boost sales of its products—compensating the athlete is merely the price of doing business.
- “NIL collectives”: Under this arrangement, a group of school boosters bands together to pool resources with the intention of compensating athletes who play at their preferred school. NIL collectives will either assist athletes in securing NIL brand deals from third parties or generate marketing opportunities (and compensation) themselves.
Notably, an NIL collective still cannot engage in “pay-to-play” under NCAA rules, and cannot offer a recruit money to play for their preferred school. Instead, a collective will direct NIL contracts to existing players in such a manner that future recruits understand that they will be well-compensated should they decide to commit or transfer to the NIL collective’s preferred school. - Direct pay/revenue sharing: In the wake of the 2025 House settlement, colleges are now able to directly compensate their athletes, up to a salary cap that is set at $20.5 million per school for the 2025–2026 athletic year. The cap is scheduled to increase by around 4% annually.
Even here, NCAA prohibitions against “pay-to-play” still apply. The payments to athletes are explicitly structured as compensation for merchandising, broadcasting, and other income streams that the use of athletes’ NIL generates. They are neither wages nor an employment relationship.
Problems Currently Faced by NIL Income Earners
Uncertainty Around Income Classification
Currently, athletes face substantial uncertainty about how to classify NIL earnings. A significant portion of NIL spending is structured in unusual ways to bypass NCAA pay-to-play regulations. States have to determine how to categorize these new types of compensation arrangements on an ad hoc basis, leaving the potential for asymmetry among states.
Generally, the guidance at the federal level is to consider earnings as follows:
- Self-employment income: compensation that requires some activity on the part of the individual receiving the compensation, such as appearances at sponsorship events, filming of advertisements, or posting on social media
- Royalties: compensation that is earned by passively profiting off of another entity’s use of the individual’s NIL, such as by allowing themselves to be depicted in a video game.
- Pass-through income: compensation earned by an individual who has formed an LLC or other unincorporated business, as some NIL-earning athletes have done.
- Wages: compensation earned by an employee for services performed on behalf of an employer. Very little, if any, NIL compensation to college athletes would be considered wages under existing law.
Most states use either federal adjusted gross income or federal taxable income as their base, though there are exceptions. Five states—Alabama, Arkansas, Mississippi, New Jersey, and Pennsylvania—use their own state-defined taxable income base, leaving open the potential for these states to categorize new forms of compensation differently.
Generally speaking, NIL is not wage compensation. NCAA prohibitions against pay-for-play mean that even direct pay deals are structured as licensing agreements. There remains a risk, however, that states could view this as a mere technicality and attempt to treat NIL collectives or universities engaging in direct pay relationships as employees. If this occurred, then self-employment income in one state could be treated as wage income in another, creating a whole host of problems.
States need not disagree on whether compensation is business income or a royalty for complexity to exist. Two states can categorize income the same way, but differ on whether that same income qualifies for credits or deductions.
Uncertainty Around Income Sourcing
Even where states agree on how to categorize income, sourcing rules can be complicated. An athlete who appears at sponsorship events as part of their endorsement contract can generally expect to face tax obligations in a state in which they make appearances, but how the income is allocated can be a more complicated question.
Take the example of a hypothetical football player who makes $50,000 for five appearances, four of which are in one state with the remaining one in another. Generally, this income would be treated as self-employment income and allocated proportionally: $40,000 to the state with four appearances, the remaining $10,000 to the state with one (though this can change if the compensation for each appearance is defined). However, many college students retain residency in the state where they grew up, and a state of residence would attempt to tax the entire $50,000, leaving an athlete subject to tax in three or more states on this one contract.
For athletes who have formed LLCs or other business entities, the issue becomes even more complicated. Some states have eliminated the Uniform Division of Income for Tax Purposes Act (UDITPA) distinction between business income and nonbusiness income, while others retain it. This means that while some states may treat the athlete’s LLC income as apportionable, others may expect to allocate it. Some states could attempt to tax the LLC’s income at the entity level, while others would treat it as pass-through income.
Even these scenarios assume that an athlete is operating under a relatively straightforward contract where they are receiving NIL compensation for engaging in a single type of activity. But take the case of an NIL contract that includes compensation for both active and passive services. One state may determine that active services dominate, and attempt to treat the entire contract as business or self-employment income. Another state may attempt to separate the passive services from the active services and tax them differently.
Underlying all this is the potential threat of jock taxes, or special income tax assessments on nonresident athletes for games played in a state. Under a strict interpretation of current state laws, college athletes should not be subject to jock taxes on NIL income. Jock tax laws usually refer specifically to “professional” athletes and entertainers who are “employees,” and college athletes are neither professionals nor employees.
Nevertheless, there remains the risk that certain states will either modify their jock tax statutes or simply claim that college athletes are de facto employees and attempt to tax them anyway. This would raise minimal revenue for states, but there are few political downsides to taxing a rival sports team. Widespread adoption of such a position would result in college athletes being required to file tax returns in nearly every state where they play games.
College Athletes Are Badly Positioned to Address These Compliance Burdens
Many of these multistate complexity issues are not unique to college athletes. However, while NIL income among professionals is generally earned by high-profile individuals with the resources to hire skilled, specialized accountants, the median NIL-earning athlete will earn around $1,000 in NIL over the course of their college career. Tax complexity is a manageable expense for millionaire athletes and celebrities, but not for college athletes earning some spending money.
Professional athletes who play in minor leagues or in less popular sports also face similar multistate compliance burdens despite paltry earnings, but even these athletes are better-positioned to handle their tax filing than minor NIL-earning athletes. These professionals almost all benefit from employee withholding, where their employer at least handles most of the complexity with specialized accountants. Filing in multiple states is still a costly burden for these athletes, but at least the burden of figuring out their actual obligations is smaller.
This is not the case for college athletes, many of whom are filing a tax return for the first time. These athletes are unlikely to know that they need to make quarterly estimated payments for self-employment income, let alone how to handle all the above complexity issues. Yet that is the expectation being placed upon them.
Solutions for Congress to Consider
Clearly Define NIL Compensation
Congress can head off the problem of a patchwork of state tax treatment by clearly defining types of NIL compensation, not just for college athletes but also any public figures who profit off of licensing their NIL. Rather than relying on the IRS to interpret past law in the context of new circumstances, Congress can make clear how NIL contracts and the compensation entailed within should be treated for tax purposes, particularly for mixed contracts that contain both active and passive income. A standard set by Congress need not be a mandate—many states would automatically conform, and would serve as a unifying guideline for those that would not.
Specifically, Congress should make clear that licensing-based NIL is not wage compensation. This is factually true, but nevertheless likely to be the single biggest area of divergence among states in terms of categorization. Brands, collectives, or schools may wish to adopt such a relationship with their athletes, but they should not be shoehorned into an inaccurate categorization for political purposes.
Clearly Define NIL Sourcing
Congress can minimize confusion for athletes by establishing clear and binding rules about how and when states can tax the income of NIL-earning athletes. Determining when and where to pay tax on NIL is currently a task fit only for the most seasoned CPA specializing in multistate tax, yet it is being foisted upon 18-year-old college students.
In particular, Congress can help with setting a standard framework for how states can approach the taxation of mixed contracts, or contracts that involve compensation for different types of services. As things stand, different states will answer this question differently, leading to not only confusion but also double taxation.
Consider Mandatory Withholding for Certain Types of Self-Employment Income
Arguably the single biggest issue for college athletes is that the entities they contract with cannot withhold taxes on their behalf without entering into an employment agreement. But Congress could extend the benefit of withholding to college athletes without the entanglement of employment.
While commonly tied to an employment relationship, precedent exists for non-employer withholding. Gambling winnings are generally subject to withholding, while working with independent contractors often places backup withholding obligations on businesses.
Nevertheless, this would have to be carefully constructed to avoid passing tax complexity from an individual taxpayer to a small local business that may want to film a commercial with a college athlete. This withholding obligation could be restricted to businesses that exceed a certain level of annual NIL activity, or simply to NIL collectives and schools that engage in direct pay. These larger entities would be far better positioned to navigate the complexities of multistate taxation than individual athletes.
Pass a Modified Version of Nationwide Mobile Workforce Protections
Congress has, in the past, considered legislation that would exempt nonresident employees and their employers from tax filing and withholding obligations in a state until they exceeded 30 days working in that state. The most recent example of this is the Mobile Workforce Tax Simplification Act of 2025, bipartisan legislation introduced by Sens. John Thune (R-SD) and Catherine Cortez-Masto (D-NV).
As currently constructed, this legislation would not benefit college athletes, as they are not employees. However, Congress could easily address this by extending the 30-day mobile workforce thresholds to self-employed individuals performing personal services as well as employees. This would ensure that college athletes traveling to a few nearby states for brief events would not face extreme tax complexity.
Prohibit State Imposition of Jock Taxes on College Athletes
As mentioned above, there remains a strong possibility that states may attempt to tax visiting athletes playing games in their state, either improperly via reinterpreting existing statutes or by amending their current laws governing taxation of nonresident athletes and entertainers. Doing so would subject athletes to tax filing obligations in each state they play in—in many cases, costing the athlete more to add another state to their TurboTax return than the amount they actually pay in tax.
Congress can address this problem by simply clarifying that states may not assess tax obligations on college-enrolled athletes based on the time they spent playing games in that state. This would not preempt any existing state policies, but would prevent them from popping up in the future.
Conclusion
College athletes today are freer than ever to receive compensation for the value of their recognizable public image, but are being thrown to the wolves on the tax front. Fortunately, Congress is well-equipped to step in and create order out of chaos.
Thank you again for taking the time to explore this growing issue. We are eager to advise on any efforts to make tax burdens, including compliance burdens, easier and more manageable for all taxpayers.