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Published:   |   Last Updated: January 4, 2024

Name, Image, and Likeness (NIL) Collectives


Name Image Likeness (NIL) collectives are structurally independent of a school, yet fund NIL opportunities for the school’s student-athletes. They are typically founded by well-known alumni and supporters of the school. Collectives generate and pool revenue raised through contributions from a wide variety of sources, including boosters, businesses, fans, and more. They use these funds to create opportunities for student-athletes to leverage their NIL in exchange for compensation.

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The NCAA has adopted rules governing NIL and NIL Collectives. You can find guidance at Interim Name, Image and Likeness Policy Guidance Regarding Third Party Involvement and Institutional Involvement in a Student-Athlete’s NIL Activities.

Collectives come in various forms, but the most common are marketplace collectives, donor-driven collectives, and dual collectives. Marketplace collectives are organizations that create a meeting place for athletes and businesses to connect and create opportunities. Donor-driven collectives pool together booster and supporter funds and create opportunities for athletes to give money back to them. Dual collectives have features of both.

While many NIL collectives have been formed as for-profit entities, others have been formed as nonprofits. Numerous nonprofit collectives have, in turn, sought and obtained Internal Revenue Code (IRC) § 501(c)(3) tax exempt status from the IRS, which potentially allows donors to receive a tax deduction for their contribution to the collective.

Tax-Exempt NIL Collectives

Numerous nonprofit collectives have sought and obtained IRC § 501(c)(3) tax-exempt status from the IRS. To be designated as an exempt organization the collective must first file Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The collective will then receive a determination letter from the IRS notifying it if it is exempt from federal income tax and whether it is classified as a private foundation or, less likely, a public charity. You can search for information about an organization’s tax-exempt status and filings on IRS’s Tax-Exempt Organization Search.

Tax-exempt collectives typically use student-athletes as independent contractors to further a purported exempt purpose. For example, some provide in-kind contributions of a student-athlete’s services to other tax-exempt organizations, including speaking, appearances, and other public relations services that help expand the organization’s reach and visibility in their communities. The student-athlete is paid by the tax-exempt collective to provide the services.

Special Rules Governing Tax-Exempt NIL Collectives

Collectives that obtain a tax exemption should be mindful of special rules that apply to tax-exempt entities. The organization must not be organized or operated for the benefit of private interests, and no part of an IRC § 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.

If a non-profit NIL collective engages in an activity, that does not constitute a permissible purpose for a tax-exempt organization; the IRS could tax revenues from this activity as unrelated business income, i.e., income from a trade or business, regularly carried on, that is not substantially related to the collective’s exempt purpose.

If the IRS finds that the tax-exempt NIL Collective’s activities constitute a primary or substantial non-exempt purpose of the organization, the IRS could revoke its tax-exempt status. The entity could then be liable for taxes on its income.

IRS’s Chief Counsel’s memo of June 9, 2023 concludedan organization that develops paid NIL opportunities for student-athletes will, in many cases, be operating for a substantial nonexempt purposeserving the private interests of student-athletes.  


For-Profit NIL Collectives

For-profit NIL collectives are typically registered as an LLC – a limited liability company. It is a structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Unlike nonprofits, for-profit LLCs are not subject to a cap on what’s considered reasonable compensation. They may therefore offer student-athletes NIL work at any compensation structure. They are also not subject to limitations on the type of activities they can facilitate. Therefore, for-profit LLCs may facilitate NIL arrangements for student-athletes such as merchandising or endorsement deals that promote commercial activities.


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