“As NIL continues to change the landscape of college sports, the state must work to foster an environment that helps our schools land America’s top recruits,” Rep. Lovvorn said in a statement. “Exempting NIL earnings from state income tax gives Alabama a competitive edge, leading to more students receiving a quality education here and more championships coming home to Alabama.”
The NCAA adopted a policy allowing student athletes to be compensated for their personal brands in July 2021. Since then, college athletics have changed fast, with the draw of lucrative deals helping some teams stack their rosters, including in Alabama.
It’s impossible to know exactly how much NIL money is flowing through the state now, including at competitive schools like the University of Alabama and Auburn University where private NIL collectives work directly with student athletes.
Seven states don’t have individual income tax, including college athletics giants like Florida and Texas. The bill, if passed, could even out that playing field for Alabama, saving student athletes between 2% and 5% of their NIL income that otherwise would be devoted to individual income tax.
Rep. Chris Blackshear, R-Phenix City, and Rep. Danny Garrett, R-Trussville, helped draft the bill. Georgia state legislators proposed similar legislation earlier this month.
Nick Patti, an attorney with James B. Pittman, Jr. PC in Daphne, who has tackled NIL legal issues and worked with athletes, said he saw early on that not having state income tax impacted student athletes’ recruiting decisions. That’s been especially successful for Tennessee, which doesn’t have a state income tax, he pointed out.
“What’s going on with Georgia and Alabama in particular is that they’re realizing that there’s some neighbors that don’t have state income taxes,” Patti said. “I would imagine that you’re going to see a lot more states follow suit.”
If passed, the tax break would go into effect on Oct. 1, applying retroactively as early as Jan. 1 and extending through Dec. 31, 2027.
Patti noted he’s curious about how Alabama’s constituents will respond.
“College athletics is a really big deal in the state of Alabama,” he said. “How is that Alabama or Auburn fan going to feel when their favorite player is not paying state income tax but they are? Is this just going to be another black eye in the topic that is NIL?”
