C'bus pro football team
Interesting LTTEs in in the C'bus Dispatch concerning the $550K NIL deals for four Buckeye players. One writer raises an intriguing question: Is it a more efficient use of one's money to pay $550K to have 4 players show up at charity events, or to donate the money directly to the charities? I'm not a tax attorney (though I play one on TV), but I'm guessing that either way there is actually a rationale that either way, the Foundation's funders would be able to claim their "donations" as charitable contributions so long as it's clearly spelled out that the NIL payment is for appearing at charity fundraisers.
Why would making payments to players be considered charitable donations? Players aren't charitable organizations... I'm confused.
If I'm providing or paying for the goods and services for a charity event, that can be deducted as a charitable contributions. So, if there's a dinner or drinks, and I pay for the catering, that's deductible. If I donate gift bags for the attendees, that's deductible. If there's entertainment, and I pay for it, that's deductible too. I'm willing to venture that paying players to show up as celebs for a fundraiser falls under that category.
The attendees are only allowed to deduct their admission or purchases (like at a charity auction) to the extent that it exceeds the FMV of what they received in return.
Sure, but what if you buy the goodie bags from your mistress at 10x their value? Then you are just using a charity to funnel money to her.
I would think there has to be some relation between the size of the contribution and its value to the charity if you want to deduct the full amount. For example, paying $500K to celebrities to attend a fundraiser that only brings in $50K is going to raise some red flags. Done right, it sounds like a good idea. But it's easy to look at this as a way to pay players first and figure out how to help charities second.
Great observation and a huge flaw in the tax code and regs as I (mis) understand them.
If I donate goods or services to a charity, I can only deduct my basis on the goods or services. So, if Picasso donated a painting for a charity auction, he can deduct the cost of his canvas, brush and paints, plus some allocation of overheads for his studio. So what, $5 for the canvas, $5 for the paints, $5 for the brush, and $10 for overheads. Picasso can claim a $25 charitable contribution if he donates it. But if I buy the Picasso for $100 million and donate it, I get a $100 million deduction, because my basis is $100 million. If Mr. Pennybags buys my Picasso at the charity auction at the bargain price of $75 million, he should not be able to deduct anything. But, I guarantee he will try to.
MGoBlue78,
this sounds like studying for the tax section of the CFP(r) exam.
Ok, hear me out... What if you pay a TON of extra money to someone like Cayman Nebraska who works in marketing to promote your bar? Is there a way to legally write that off?
Interesting, but The Foundation is set up as a 501c3 so the funders were already getting a charitable donation tax break anyway. I guess maybe this helps it maintain the 501c3 status?
You're not confused. Payments to players are NOT considered charitable donations. Ever.
Just make sure that the charitable event isn't outside if it's snowing because they sure as hell wouldn't show up.
OP: Interesting news, thanks, but why not just link to the article of most interest (rather than letters to the editor)? Here it is:
As for the title, I would've gone with something more straightforward like "OSU NIL deal: 4 players to divide $550K," but that's just me.
Honestly, I thought the local C'bus LTTE reaction was more intriguing than the totally unsurprising announcement of six figure payoffs to Buckeye players - something that's likely been going since Hector was a pup, but is now out in the open as legit. But, the caption suggestion is well taken.
I’m not a tax lawyer (although I took L. Hart Wright’s courses many, many years ago), but couldn’t there be a challenge to the claim this was a donation if the payment was out of all proportion to the value? E.g., 4 players are paid $550K to go to a fund raiser that nets the charity $250K, compared to the same fund raiser that netted $225K a year earlier with no players. If it walks like a duck etc., and if it walks like a charade to pay players while claiming it is a charitable donation, seems the IRS could mount a decent challenge.
I’m not a tax lawyer, but I did stay at a Holiday Inn last night.
Those four players had better show up at these fund raising events. If not, someone will call Shenanigans on that 501c3 organization.
I absorbed 10% of what Doug Kahn tried to teach me about tax law and have forgotten 90% of that.
Haha. That's about 9% more than I retained. If I'd paid more attention, maybe I'd be in better financial shape.
I do not have enough fingers and toes to count the number of charity auctions where restaurants provide catering, artists and business donate works for auction, and the attendees pay a quarter of the FMV of what they received. The real donors are the folks who provided the wherewithal for the event, and are entitled to deduct nada. The attendees receive goods vastly in excess of the value of their "donation", which they should not be able to deduct. But I guarantee they deduct it anyway, and it's never questioned.
If I a running a non-profit, I am staying the fuck out of this NIL that involved payments like this. Even if you somehow get thru IRS (which is not that easy), all it takes is someone writing something about your organization. It can discourage other contributors. Unless this non-profit for just funneling money to players and getting a tax break, I will get my popcorn ready in a few years.
I think it's been well established in the past decade that if you're super wealthy, the idea that you would be busted for money laundering and/or abuse of a non-profit is rather quaint.
"Still, I wish I could grasp how Brian Schottenstein and his foundation are doing more good for charities by paying players to show up at events rather than give the charities a half million in donations directly as he claimed in Monday’s article."
You want one of the pioneering families in the art of retail liquidation to be straight about money?
Rule: the recipient entity needs to be organized and function as a 501(c)(3) organization to qualify as a charity. Neither an individual or an organization can claim a NIL payment *to an athlete* as a charitable donation as the athlete recipient is not a 501(c)(3) organization.
Regarding "efficiency" of a donation. A donor should write the check directly to the charity as it saves the $550K that is being paid for the appearance.
Agreed: Schottenstein is playing a sad game diverting the half mill ...
Proud Michigan Man moment but only slightly related to the OP:
My dad is from Argentina so more of a futbol fan than football. He never really got into watching Michigan games with my mom (former UM employee), my sister (UM grad) and myself (born in AA) but he tries to keep up with us and our passion for all things UM and UM sports.
His wife is currently working in Columbus for a couple months in the oncology depot at OSU Hospital. I assume the pay is good as I can see no other reason to take that job, but I digress. They're there. They know a bit about the rivalry.
Yesterday, he called me laughing and said "I'm driving by the big toilet!!"
He was on OSU campus driving by the football stadium lol
This is probably only funny to me but I thought I'd share anyway!