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Today’s Case

Texas A&M shuts down 12th Man+ NIL Fund after IRS threatens foundation's nonprofit status

A booster-funded entity run through Texas A&M‘s 12th Man Foundation fundraising arm, the 12th Man+ Fund became the closest public link between a traditional athletic department fundraising effort and NIL-related donor dollars.

Now, only six months after the Fund’s launch, Texas A&M has shut down the Fund after reviewing directives from the IRS. The decision to shut down the NIL fund came after the IRS released a memo on June 9, which told NIL collectives their function doesn't fit within the confines of tax-exempt status. The 12th Man+ Fund attempted to reward donors with athletic department points and tax benefits in exchange for donations to provide NIL compensation to athletes.

However, the 12th Man Foundation will still support NIL opportunities, with plans to create deals for athletes by expanding marketing outreach rather than direct payment.

Statement from the 12th Man Foundation: "As part of its altered approach, the organization plans to support NIL opportunities for Aggie student-athletes by expanding its marketing outreach using unrestricted annual fund contributions."

The Verdict:

• NIL is still strong for the Aggies

  • Despite this unfortunate news, NIL at Texas A&M is still extremely prominent. Donor money still flows in regularly (and in large amounts), Aggie athletes are still marketable locally and nationwide, and the efforts of the athletic department to put NIL at the forefront are among the best in the nation.

• The point system for donations is a great idea - one that should continue in other collectives

  • Donors receiving points based on donations that would provide them special access and opportunities is smart. Fans love gaining special privileges - and this was a nice setup to provide just that.

  • I could definitely see other collectives emulating this model - and providing different tiers of points based on dollars donated.

• IRS was too much to overcome

  • Trying to bypass the NCAA is one thing; trying to bypass the IRS is a completely different hurdle (one that is generally impossible to overcome).

  • With the IRS mandating that donations to NIL collectives would not be tax-exempt, this put plenty of collectives in a tough situation.

    • Those collectives that were set up as a 501(c)(3) (such as the 12th Man+ Fund) were left scrambling on how their collective would function, with some discontinuing and some shifting focus to other marketing purposes.

I’m hosting an NIL for Parents Webinar on Wednesday, August 16!

Topics include (but not limited to) What is NIL, what parents should ask schools, and how to get started.

Register here and please share with anyone who would be interested in this webinar!

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Court is adjourned. Go be great!!