H.R. 10236: Protecting Student Athletes from Unexpected Tax Liability Act

This bill would change federal tax withholding rules for name, image, and likeness payments made to student athletes.

What it would do

• It would require the payer to withhold 30% of certain NIL payments made to student athletes and send that amount to the IRS, similar to how wages are withheld from paychecks.
• This would apply even if the student athlete is treated as an independent contractor rather than an employee.
• The bill defines NIL payments broadly to include money, property, or services given in exchange for the commercial use of a student’s name, image, or likeness.
• It defines a student athlete as a full-time student who is making satisfactory progress toward a degree and who participates in intercollegiate or varsity athletic competition.
• For non-cash compensation, the amount withheld would be based on the fair market value of what is given.
• A student athlete could choose not to have this withholding apply, and that choice would remain in effect until the student ends it.
• The bill says this withholding rule should not be used to decide whether the athlete is legally an employee or independent contractor for other tax purposes.

Tax penalty relief for some student athletes

• The bill would also give certain student athletes a break from IRS underpayment penalties if the withholding causes them to owe less estimated tax than expected.
• This penalty relief would apply only for student athletes who are affected by the new withholding rule and only if they have not already used this relief in a prior year.

When it would take effect

• The new withholding rule would apply to payments made in tax years beginning after December 31, 2027.

IRS study and report

• By December 31, 2029, the Treasury Department would have to report to Congress on how the new withholding rule is working.
• The report would need to address the costs and benefits of automatic withholding, whether the 30% rate is useful or accurate for most student athletes, and how well payers are following the rule.

Relevant Companies

None found