Rep. Sewell Introduces Legislation to Protect College Athletes from Unexpected NIL Tax Bills

Washington D.C. - As college football season gets underway, U.S. Rep. Terri Sewell (AL-07), a senior member of the House Ways and Means Committee, introduced the Protecting Student-Athletes from Unexpected Tax Liability Act, legislation to help college athletes avoid unexpected federal tax bills and penalties on income they earn through name, image, and likeness (NIL) agreements.

"I am thrilled that college athletes are finally being compensated for the tremendous talent, hard work, and value they bring to their schools, communities, and sports," said Rep. Sewell. "But as the NIL landscape continues to evolve, too many young athletes are being asked to navigate complex tax obligations without the knowledge or resources they need."

"I have heard troubling stories of student-athletes who were unaware of their tax obligations and later found themselves facing significant tax bills and penalties from the IRS after much of their NIL income had already been spent," continued Sewell. "No young person should be blindsided by an unexpected tax liability simply because they did not understand the complex rules that came with their newfound income. My legislation is a commonsense step toward making sure student-athletes are protected from tax burdens that could follow them long after their playing days are over."

The Protecting Student-Athletes from Unexpected Tax Liability Act would require a portion of NIL compensation to be automatically withheld for federal tax purposes, similar to the withholding that occurs with a traditional paycheck. By withholding taxes when NIL income is paid, the legislation would help student-athletes meet their tax obligations throughout the year and reduce the risk of significant, unexpected tax bills and penalties during tax season.

Automatic withholding would also simplify tax compliance for student-athletes, many of whom are simultaneously balancing academics, athletics, and the financial responsibilities that come with NIL compensation.

The need for this legislation was underscored recently by Sam Acho, a nine-year NFL veteran and former NFL Players Association Vice President, who testified before the House Ways and Means Committee about the financial challenges facing college athletes navigating NIL compensation. Acho shared the example of an 18-year-old college athlete who earned $750,000 in NIL income but, after supporting his family and paying for ordinary living expenses, was left with just over $6,000 and a $320,000 tax bill because he did not understand his tax obligations or make estimated quarterly payments. In his testimony, Acho urged Congress to act and specifically proposed automatic withholding for NIL income as a potential solution.

Bill text is available here.