{"id":2946,"date":"2021-01-26T15:45:21","date_gmt":"2021-01-26T20:45:21","guid":{"rendered":"https:\/\/journals.law.harvard.edu\/jsel\/?p=2946"},"modified":"2023-07-25T11:40:52","modified_gmt":"2023-07-25T15:40:52","slug":"analyzing-a-creative-nil-proposal-interview-with-hls-clinical-professor-brian-price","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/jsel\/2021\/01\/analyzing-a-creative-nil-proposal-interview-with-hls-clinical-professor-brian-price\/","title":{"rendered":"Analyzing a Creative NIL Proposal – Interview with HLS Clinical Professor Brian Price"},"content":{"rendered":"

In the midst of the ongoing debate over student-athlete compensation and the expansion of Name, Image, and Likeness rights, a Professor at Georgia Tech, and former college athlete himself, Baratunde Cola, has proposed a <\/span><\/i>unique idea<\/span><\/i><\/a>: have student-athletes create nonprofit organizations to receive endorsement money, have those athletes pay themselves a portion of the incoming revenue, and use the remaining funds for charity or to enhance their educations. <\/span><\/i>Alex Blutman<\/span>, JSEL\u2019s Managing Editor for Online Content, caught up with <\/span><\/i>Brian Price<\/span><\/a>, Director of Harvard\u2019s Transactional Law Clinics and faculty advisor for the Harvard Law Entrepreneurship Project, to discuss this latest proposal.\u00a0<\/span><\/i><\/p>\n

Q: Professor Price, thank you for lending your insights to this issue and joining me for a conversation today. At first blush, this seems like an interesting idea. How feasible do you think this is?<\/strong><\/p>\n

BP: First, let me say that I applaud creative thinking and new ideas for tackling long-standing issues. And Professor Cola\u2019s idea falls into that category. However, as with any new approach to solving an entrenched problem, the biggest hurdle to overcome is in the details.\u00a0<\/span><\/p>\n

What kind of technical or legal hurdles might student-athletes encounter in attempting to organize their own nonprofits?<\/strong><\/p>\n

To attain federal tax exempt approval as a 501(c)(3) organization, the organization must meet the federal tax guidelines of being operated and organized for one of the approved enumerated purposes outlined in the statute. There\u2019s also the distinction between being a public charity or a private foundation. The reporting requirements of the latter are more onerous, and are tied to how many sources of financial support the organization has. The fewer sources there are of overall financial support indicates to the IRS that the organization is more vulnerable to abuse by its funders and those in control.<\/span><\/p>\n

Professor Cola proposes that athletes could keep a portion of the revenue received by their nonprofits, say 10-20%, and could use the rest on charities or to expand their own educational opportunities through the purchase of materials (e.g., a laptop) or by funding an educational trip or unpaid internship. Are there rules in place addressing how nonprofits can pay their directors\/officers?<\/strong><\/p>\n

Whatever the organization pays its personnel, particularly those in positions of leadership, must be reasonable in light of the organization\u2019s revenue, and in line with what comparable organizations pay their personnel. To determine that a certain percentage of an organization\u2019s revenue will go toward a specific person\u2019s compensation suggests something akin to earmarking in advance a portion of the organization\u2019s revenue to that person. This is generally frowned upon as running counter to the IRS\u2019 prohibition against private inurement; an organization cannot simply determine to pay a share of its profits to an individual as if it, for example, were paying a commission or profits on earnings. Along these same lines, an organization cannot be created simply to benefit a single individual\u2019s educational or extracurricular pursuits.\u00a0<\/span><\/p>\n

The proposal suggests that once an athlete\u2019s college career is over, he or she can continue the nonprofit or dissolve it and take the remaining funds with no limitations (after taxes). What kinds of regulations are in place for the dissolution of nonprofits that might make this difficult?<\/strong><\/p>\n

When a tax-exempt organization is dissolved, the remaining assets do not convert into private property. They must be donated to another tax-exempt organization organized for similar tax-exempt purposes.\u00a0<\/span><\/p>\n

Professor Cola suggests the nonprofit structure would prevent the problem of \u201cboosters.\u201d He argues that since the salary that athletes could pay themselves out of the nonprofit would only be a portion of the income received, a booster would have to pay many multiples on a base amount in order to put money in the athlete\u2019s pockets. Do you think this would prevent boosters from influencing athletes or conducting some sort of \u201cpay for play\u201d scheme?<\/strong><\/p>\n

I don\u2019t personally know any boosters, and all I know about the subject is what I\u2019ve read or heard in the media. But logic tells me that if someone wants to get money into another person\u2019s hands with a certain goal in mind they will do so according to their preferred means.\u00a0\u00a0<\/span><\/p>\n

What do you think of the criticism that this is just another way to put limits on college athletes\u2019 ability to profit from their status, platform, talent, and work?<\/strong><\/p>\n

While I don\u2019t agree with the non-profit idea as articulated, I don\u2019t think it\u2019s fair to suggest that the motive in suggesting the non-profit route is simply another way to put limits on athletes\u2019 ability to earn income. The issue of compensation is a broader issue. As I understand it, efforts are underway to figure out how best to achieve the goal of fairly compensating athletes. Undoubtedly, changing an entire way of doing something that\u2019s never been done before is a massive and complicated undertaking. It will take creativity to construct rules and a process that is both balanced and effective. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

In the midst of the ongoing debate over student-athlete compensation and the expansion of Name, Image, and Likeness rights, a Professor at Georgia Tech, and former college athlete himself, Baratunde Cola, has proposed a unique idea: have student-athletes create nonprofit organizations to receive endorsement money, have those athletes pay themselves a portion of the incoming 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