A quick background on NIL: In April, the NCAA voted to support changes for athletes to be compensated by third parties (i.e., not the schools themselves) for endorsements, appearances, camps and other like opportunities.
Expected to go into effect at the start of the 2021-22 academic year, it followed decades of such benefits being impermissible by NCAA rule. The NCAA has wrestled with how best to regulate NIL compensation, even seeking congressional legislation. The NCAA particularly is wary of boosters or others using NIL as a recruiting enticement – come to School X and you’ll get a $50,000 endorsement – rather than a genuine business transaction for a service rendered and has sought to place “guardrails” on the framework.
In Cola’s proposal, athletes could keep a portion of the revenues received – perhaps 10% to 20% – and could use the rest on charities of their choosing or to expand their own educational opportunities.
Through the non-profit, for instance, an athlete could purchase a laptop, take an educational trip or fund a free camp for kids in their home communities. An athlete could potentially have the freedom to take an unpaid summer internship, paying himself or herself the salary earned as the head of the nonprofit. It would give athletes experience in forming and running a business. In short, it would earmark money to provide for athletes the sort of educational experiences that their non-athlete peers have but they often cannot, dovetailing with the overall missions of their schools.
“Let’s empower our student-athletes who can take advantage of NIL revenue to have more control over their educational experiences and offseason work and give them a non-profit corporate structure for a tax-break incentive, too,” Cola wrote in an essay posted online. “It aligns with American values and is in our national interest because these exceptional students become our future leaders.”
The money spent toward the aims of the non-profit would be untaxed, although the salary portion would be taxed. Once the athlete’s college career is over, he or she can continue the nonprofit or dissolve it and take the remaining funds with no limitations (after taxes).
To Cola, it also would streamline the process for athletes and schools, rather than require athletes to deal with reporting income and filing taxes as a self-employed entity and schools to follow up on those different revenue streams to ensure that they fit within rules.
“It just makes it neater, and it organizes things,” Cola said. “Now when you bring money in, you’re bringing money into your nonprofit. You’re not having to track and report everything you spend money on to the institution. You have a structure that has a tax form for it.”
Another significant benefit of Cola’s plan is that he believes it would limit what he termed “bad actors,” such as boosters or agents, trying to put money into the hands of potential clients for “pay for play” schemes or to influence them.
To Cola, given that the salary that athletes could pay themselves out of a 501(c)(3) would be only a portion of the income received, an agent or booster seeking to put $10,000 in an athlete’s hands would have to pay multiples on that amount, as most of the money would be committed to the purposes of the nonprofit. Further, boosters or agents' payments would have to be included on a tax form, which they presumably would want to avoid if they weren’t above-board transactions.
Cola, who has been a professor at Tech since 2009, has a fruitful history with unconventional ideas. In 2017, he won the Alan T. Waterman Award, which is given by the National Science Foundation to outstanding researchers age 35 or younger in the field of science and engineering and includes a $1 million five-year research grant. It’s considered the nation’s highest honor for early-career scientists and engineers. Cola was recognized for developing new methods for controlling light and heat in electronics and at the nanoscale.
He’s also the founder and CEO of Carbice, a thermal-materials company whose products include a tape that helps prevents electronic devices from overheating. He became Tech’s faculty athletics representative in July.
Critics of the NCAA’s attempt to put guardrails on the plan have argued that there is no reason to place limitations on compensation, that if a booster wants to give an athlete money, there shouldn’t be any rules banning such a transaction.
Former Tech football captain Roddy Jones, now an analyst for the ACC Network, called Cola’s proposal an “interesting concept” and likes that smart people are trying to tackle the issue of NIL compensation. But he opposes the overarching idea of putting limits on how athletes can capitalize on the status and platform that they’ve made for themselves. He also noted that if boosters or agents were disinclined from paying athletes through NIL means, they would just continue to work outside the system.
“We don’t put guardrails on college dropouts that start tech companies, so why in this scenario are we doing it?” Jones asked. “I think it’s only because it’s tied in some ways to the college, and I get that, but I think that’s sort of a mindset thing.”
Former Tech center Freddie Burden’s preference would be for athletes to be receive the full amount of any NIL money. He had questions about how the percentage of revenue that athletes could pay themselves would be regulated. But if it were put into place, he liked the idea. He had the additional suggestion that athletes supporting charities could raise awareness for them by wearing them on their cleats or wristbands.
“I think it’s a great idea, though,” he said. “And for athletes to be paid any kind of stipend or anything, it’s amazing.”
The next step for the NCAA is for final legislation to be drafted by Nov. 1. It is expected to be approved by January. Cola, who said he has received encouraging feedback from college athletes regarding his proposal, hopes for it to be part of the conversation.
Said Cola, “At least it gets people thinking in a different direction.”
Georgia Tech mechanical engineering professor and faculty athletics representative Baratunde Cola.
Credit: Courtesy Bar
Credit: Courtesy Bar