Name, Image, Likeness

Maged said:
Frankly, I did not understand how tip income should be treated differently from W-2 income. It's a slippery slope from there.
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There are certainly other examples of exempt income, but generally they have fairly reasonable policy explanations. The "tips" proposal really doesn't, which is not to say that there is any constitutional impediment, since there isn't. Three people earning the same wages should normally be subject to the same income tax absent a good reason to distinguish them. After all, it is hard see why a day laborer or grocery store clerk should be taxed more than a restaurant server earning the same income. But lots of bad policies are good politics -- see student loan forgiveness and mortgage interest deductions. Few tax policy experts support any of these policies but our laws are not made by experts but by representatives of voters, and on balance that is certainly a good thing. We live in an imperfect world, and that is ok.
 
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AustinDevil said:
The chief *federal* encumbrance is the commerce clause. State constitutions often have equal-protection and like language that is even more extensive than the federal versions, however. Not that I expect, e.g., the Alabama Supreme Court to tell the U of Alabama they can't do this...
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Yes, states do indeed have their own constitutional provisions which could be tested, but the most common tax-related limitation is an equal protection type "uniformity" clause that is usually limited to ad valorem taxes. While there might be odd exceptions, in general I don't see a legal barrier to states enacting NIL income exemptions.
 
Mike Petrik said:
I think it will "pass legal muster" rather easily. The chief constitutional encumbrance on state taxing powers is the commerce clause, not the equal protection clause. States are generally free to execute their own taxing policies based on their own understandings of fairness and economic interests. Whether this would be "fair" and therefore good tax policy is certainly debatable, however.
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Thanks for chiming in with your expertise.

It's also possible that Georgia's Supreme Court would rule on it differently than Illinois' court system perhaps. I am not a lawyer or expert in IL state law though - you clearly know way more than I do on it.

For IL, this is just a proposal by a Republican while the State Legislation has a super-majority of Democrats, so we'll see if they actually look to pass it in the first place. I have no idea.

Different ballgame (pun intended) in GA and AL -- state politicians take their SEC football much more seriously than IL does for U of I / NU athletes....
 
Bluedog said:
Thanks for chiming in with your expertise.

It's also possible that Georgia's Supreme Court would rule on it differently than Illinois' court system perhaps. I am not a lawyer or expert in IL state law though - you clearly know way more than I do on it.

For IL, this is just a proposal by a Republican while the State Legislation has a super-majority of Democrats, so we'll see if they actually look to pass it in the first place. I have no idea.

Different ballgame (pun intended) in GA and AL -- state politicians take their SEC football much more seriously than IL does for U of I / NU athletes....
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It’s a recruiting advantage to offer tax-free NIL for UGA and Alabama. (And GT to the extent anyone in our legislature cares here).
 
I may be missing something here but wouldn't matter where their tax residence is, for purposes of the state income tax? For example, I'm guessing Cooper Flagg is still a resident of Maine, so would have to pay Maine state income taxes on any taxable income (NIL and otherwise) that he might receive.
 
OldPhiKap said:
It’s a recruiting advantage to offer tax-free NIL for UGA and Alabama. (And GT to the extent anyone in our legislature cares here).
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Yes, they have called out rather than affording them an "advantage," it's instead "leveling the playing field" for them against TX, TN, and FL schools that don't have state income tax.

duke79 said:
I may be missing something here but wouldn't matter where their tax residence is, for purposes of the state income tax? For example, I'm guessing Cooper Flagg is still a resident of Maine, so would have to pay Maine state income taxes on any taxable income (NIL and otherwise) that he might receive.
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This is why top players should now seek the advise of tax accountants. Residence plays a part but also where you get your income from. If you're a resident of CT but work in NY, you know the drill....NY wants its tax money. NBA players need to file tax returns for all states where they play games. I don't know if that's the case for NCAA athletes -- but imagine it's more about the NIL location (until colleges start paying players directly next year).

When I worked at Duke as an IL resident, I believe my withholdings were against NC initially, but then IL gave me credit for the taxes already spent. Or something like that.
 
duke79 said:
I may be missing something here but wouldn't matter where their tax residence is, for purposes of the state income tax? For example, I'm guessing Cooper Flagg is still a resident of Maine, so would have to pay Maine state income taxes on any taxable income (NIL and otherwise) that he might receive.
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His family sold the house so I think he could say with a straight face he doesn’t live in Maine. He actually did his senior year of hs in FL which is more tax friendly.
 
"The landscape has changed around us," Keatts said. "If you went to the Final Four, if you won the ACC, you could get any player. Not any player, but most of the players you wanted because of that. But when you add the NIL part to it, none of that matters because you can flip a team just like that.

"The disappointment is if we didn't have NIL like it is now, hell, we might have a different group of guys because of the fact that they're coming just because they want an education, they want a chance to play at NC State, they want to play in our style. But now it's not about that. It's about what can you provide financially. And I get it. This is not a rant to say I'm against NIL."
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---Coach Kevin Keatts, in a rant against NIL.

www.wralsportsfan.com

NC State's Keatts blames NIL for lack of Final Four bump. Will he get chance to rebuild roster again? :: WRALSportsFan.com

Coming off its first ACC Tournament title and its first Final Four appearance since the 1980s, NC State is likely to miss the ACC Tournament.
www.wralsportsfan.com www.wralsportsfan.com
 
duke79 said:
I may be missing something here but wouldn't matter where their tax residence is, for purposes of the state income tax? For example, I'm guessing Cooper Flagg is still a resident of Maine, so would have to pay Maine state income taxes on any taxable income (NIL and otherwise) that he might receive.
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Normally, a state taxes non-residents on income they earn in that state and taxes residents on all income they earn regardless of where but provides credits for taxes paid to other states. While typically imperfect, the credit mechanisms work reasonably well to avoid double tax.
 
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duke79 said:
I may be missing something here but wouldn't matter where their tax residence is, for purposes of the state income tax? For example, I'm guessing Cooper Flagg is still a resident of Maine, so would have to pay Maine state income taxes on any taxable income (NIL and otherwise) that he might receive.
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Coop played his last year of high school in Florida and his family has moved to Greensboro for at least this year, so I'm not sure what basis he would have to claim Maine residency.
 
Mike Petrik said:
I think it will "pass legal muster" rather easily. The chief constitutional encumbrance on state taxing powers is the commerce clause, not the equal protection clause. States are generally free to execute their own taxing policies based on their own understandings of fairness and economic interests. Whether this would be "fair" and therefore good tax policy is certainly debatable, however.
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Moeiver, federal income taxes typically dwarf state taxes, so how relevant is it? NIL is still subject to federal taxes.
 
sagegrouse said:
Moreover, federal income taxes typically dwarf state taxes, so how relevant is it? NIL is still subject to federal taxes.
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Fair point, but state income tax planning is certainly relevant to many professional athletes who choose their state of residence carefully. Although NIL dollars are typically substantially less, I would not be surprised if such planning proves to be at least one consideration for some of the more coveted athletes with the largest NIL payouts. Yet, I agree that it is generally likely to be a minor factor.
 
Mike Petrik said:
Fair point, but state income tax planning is certainly relevant to many professional athletes who choose their state of residence carefully. Although NIL dollars are typically substantially less, I would not be surprised if such planning proves to be at least one consideration for some of the more coveted athletes with the largest NIL payouts. Yet, I agree that it is generally likely to be a minor factor.
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Adding to my post above, I would note that it might not be a minor factor if NIL income is treated as income from intellectual property rather than income from services, which I imagine should be the case. This is because income from intellectual property normally is taxed only by the individual's state of residence whereas income from services are taxed both by the state of residence and the states where such services are performed. This would mean 100% of the income would be either taxed or not taxed depending on the treatment it receives from the state of residence. I can certainly envision athletes working diligently to establish their residence in tax-attractive states, which do not necessarily need to be the state in which their school is located. Rules for tax residency are not as simple as most people think, and even the effect of the 183 day rule is not as straightforward as even some tax professionals assume. It is tricky stuff, but the bottom line is that it is easier to establish residency in a state that it is to disestablish residency in a state. One can do all the things necessary for the first without successfully accomplishing the latter.
 
Mike Petrik said:
Adding to my post above, I would note that it might not be a minor factor if NIL income is treated as income from intellectual property rather than income from services, which I imagine should be the case. This is because income from intellectual property normally is taxed only by the individual's state of residence whereas income from services are taxed both by the state of residence and the states where such services are performed. This would mean 100% of the income would be either taxed or not taxed depending on the treatment it receives from the state of residence. I can certainly envision athletes working diligently to establish their residence in tax-attractive states, which do not necessarily need to be the state in which their school is located. Rules for tax residency are not as simple as most people think, and even the effect of the 183 day rule is not as straightforward as even some tax professionals assume. It is tricky stuff, but the bottom line is that it is easier to establish residency in a state that it is to disestablish residency in a state. One can do all the things necessary for the first without successfully accomplishing the latter.
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Excellent post, Mike! And, yes, some states such as New York state (and even New York City) are very aggressive about going after and auditing those individuals (usually with substantial incomes) who move away, whether completely or partially, from the state (New York, e.g.) to another state (if doing it primarily for state income tax purposes, and usually a state with a lower or no state income taxes; i.e., Florida or Texas, etc). I've had a few friends and acquaintances who have moved out of New York (mostly New York City) to another state (although many of them have kept their apartments in NYC) and they have been aggressively audited by both New York City and New York state tax authorities, often for a couple of years in a row, about their residency. Obviously, you have to prove that you spent at least half the year (183) completely out of New York, plus you have register to vote in the state of your new domicile, register your car(s) there, have all your mail sent to the new address and even such tasks as moving your favorite paintings or other treasured personal items to your new residence. New York, in particular, does NOT like to give up that tax revenue.
 
duke79 said:
Excellent post, Mike! And, yes, some states such as New York state (and even New York City) are very aggressive about going after and auditing those individuals (usually with substantial incomes) who move away, whether completely or partially, from the state (New York, e.g.) to another state (if doing it primarily for state income tax purposes, and usually a state with a lower or no state income taxes; i.e., Florida or Texas, etc). I've had a few friends and acquaintances who have moved out of New York (mostly New York City) to another state (although many of them have kept their apartments in NYC) and they have been aggressively audited by both New York City and New York state tax authorities, often for a couple of years in a row, about their residency. Obviously, you have to prove that you spent at least half the year (183) completely out of New York, plus you have register to vote in the state of your new domicile, register your car(s) there, have all your mail sent to the new address and even such tasks as moving your favorite paintings or other treasured personal items to your new residence. New York, in particular, does NOT like to give up that tax revenue.
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Exactly right, and even states like my own Georgia watch this carefully too. It is tempting for very high-income earners to try to move their residency to Florida by simply acquiring some Florida property, spending sufficient time there, and undertaking a few other easy steps, and while Florida is happy to claim them, they foot-fault in Georgia. The general rule is that it is that once a state residency is established by a taxpayer the burden of proof is on that taxpayer to demonstrate that he is no longer a resident, and evidence that another state acknowledges his residency is not by itself sufficient. Things like voting registrations and driver's licenses are usually pretty easy to change and are therefore not often overlooked, but other connections such as board memberships, club memberships, children's school attendance and even homestead exemptions often are.
Apologies to forum members who find this little mini-exchange tedious ....
 
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And just to add to the tediousness of this discussion and for any tax nerds who may be on here, find below a link to an informative article about how professional athletes and NIL-receiving college athletes are taxes by the various states.

Athletes and Taxes - Greenleaf Trust

Let’s be honest. There is no way to separate sports from money… or taxes.
greenleaftrust.com greenleaftrust.com
 
duke79 said:
Excellent post, Mike! And, yes, some states such as New York state (and even New York City) are very aggressive about going after and auditing those individuals (usually with substantial incomes) who move away, whether completely or partially, from the state (New York, e.g.) to another state (if doing it primarily for state income tax purposes, and usually a state with a lower or no state income taxes; i.e., Florida or Texas, etc). I've had a few friends and acquaintances who have moved out of New York (mostly New York City) to another state (although many of them have kept their apartments in NYC) and they have been aggressively audited by both New York City and New York state tax authorities, often for a couple of years in a row, about their residency. Obviously, you have to prove that you spent at least half the year (183) completely out of New York, plus you have register to vote in the state of your new domicile, register your car(s) there, have all your mail sent to the new address and even such tasks as moving your favorite paintings or other treasured personal items to your new residence. New York, in particular, does NOT like to give up that tax revenue.
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I’m a 20+ year NYC resident who files fairly straight forward taxes here and got audited last year for my now former accountant making a dumb mistake with a deduction so I underpaid my federal taxes by about $2k. I was clearly in the wrong but it is amazing that they are wasting their time on me (I am not that wealthy) and finding this.

Sorry - needed to vent.
 
Adrian Wojnarowski, former ESPN insider and current GM of St. Bonaventure men's basketball, is personally raising money for the team's NIL fund.

apnews.com

Wojnarowski auctions iPhones used for 'Woj bombs' to raise NIL money at St. Bonaventure

Adrian Wojnarowski is cleaning out his office of cell phones and press passes, and even offering dinner dates in a bid to raise name, image and likeness funds for the St.
apnews.com apnews.com

Among the items up for bid are Wojnarowski’s ESPN ID badge, various press passes as well as several iPhones he used to break news, including the one announcing his departure from ESPN for St. Bonaventure in September... Also up for bid are an unlimited number of video chats and dinners with Wojnarowski.

A dinner with him might be worth it, if he belches afterward and calls it a "Woj Bomb".
 
CrazyNotCrazie said:
I’m a 20+ year NYC resident who files fairly straight forward taxes here and got audited last year for my now former accountant making a dumb mistake with a deduction so I underpaid my federal taxes by about $2k. I was clearly in the wrong but it is amazing that they are wasting their time on me (I am not that wealthy) and finding this.

Sorry - needed to vent.
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They went after you because you’re “rich”-you have $$ to be taken. Do you think they audit anyone who ends up not paying anything or getting a payment from Uncle Sam?
 
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