Chief Counsel Rules on Exempt Purposes Regarding NIL Collective, AM 2023-004

An organization that developed paid name, image,and likeness (NIL) opportunities for student-athletes was operating for a substantial nonexempt purpose. This would be serving private interests of student athletes. The private benefits provided to student athletes were not incidental both qualitatively and quantitatively to any exempt purpose furthered by that activity. Therefore, it did not further an exempt purpose under Code Sec. 501(c)(3).

The private benefit to student-athletes was generally directed to a limited noncharitable class. Student-athletes were not themselves a recognized charitable class. Many organizations that developed paid NIL opportunities for student-athletes were not tax exempt under Code Sec. 501(c)(3).