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Alabama Bill Follows Georgia in Effort To Exempt NIL Earnings From Tax

Alabama lawmakers introduce a bill to exempt NIL earnings from state income tax, mirroring Georgia’s move to gain a recruiting edge

Noah Henderson

Alabama mascot Big Al and Auburn mascot Aubie stand together as Alabama Governor Kay Ivey proclaims Friday August 30 as College Colors Day during a press conference, on the state capitol steps in Montgomery, Ala., on Wednesday August 21, 2024. The event was attended by mascots and students from colleges and universities around the state.
Alabama mascot Big Al and Auburn mascot Aubie stand together as Alabama Governor Kay Ivey proclaims Friday August 30 as College Colors Day during a press conference, on the state capitol steps in Montgomery, Ala., on Wednesday August 21, 2024. The event was attended by mascots and students from colleges and universities around the state. / Mickey Welsh / Advertiser / USA TODAY NETWORK
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On Feb. 12, Alabama House Bill 240 was read by state legislators for the first time.

The partisan bill sponsored by Joe Lovvorn (R-79) and drafted by fellow state congressmen Chris Blackshear (R-80) and Danny Garrett (R-44) looks to exempt student-athletes at Alabama schools from having to pay state income tax on NIL earnings, and if enacted, will retroactively shield athletes’ earnings starting from Jan. 1 of this year.

The bill was introduced only one week after the State of Georgia introduced similar legislation — Alabama is the first of many states expected to copy Georgia’s novel recruiting incentive.

My recent article (here) outlines why the elimination of state tax is even more important in college recruiting than professional free agency.

Alabama currently offers a progressive state income tax, but for single filers, all income over $3,000 is taxed at a top rate of 5%. For schools like the University of Alabama and Auburn, which routinely compensate their most talented athletes with six-figure NIL compensation packages, this tax reduction will yield sizable increases to net NIL earnings for their student-athletes.

For both high school recruits and college athletes in the transfer portal, the elimination of state income tax on NIL earnings could become a deciding factor in choosing an Alabama school.

In a statement to Fox54, the bill’s sponsor, Lovvorn, left no room for interpretation of why the bill is being introduced:

“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. 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.”

Other states within the geographic footprint of the SEC (Tennessee and Florida) do not impose state tax on any of their residents. This difference in state policy gave schools in these jurisdictions a leg up for NIL compensation.

While the benefits will be most prominent at the two SEC programs within Alabama, the advantage will still help in-state Group of 5 programs South Alabama, Troy, Jacksonville State and the University of Alabama at Birmingham. Other Division I schools in the state include Samford, Alabama A&M, Alabama State and North Alabama.

Fans of Alabama colleges are likely to embrace such reform, however, critics have bashed the trend noting that such a narrow change to tax code places student-athletes in a class of people above the common man.

Many who lose roughly 5% of their annual earnings to the state government dislike the idea that athletes receive special treatment.

On school campuses, non-athlete influencers are common, and their lack of representation in the bill has raised frustrations.

As the landscape of college sports continues to evolve, state legislatures continues to be important in shaping competitive advantages.

Tax policy is the newest weapon politicians have in their NIL arsenal.

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Noah Henderson
NOAH HENDERSON

Professor Noah Henderson teaches in the sport management department at Loyola University Chicago. Outside the classroom, he advises companies, schools, and collectives on Name, Image, and Likeness best practices. His academic research focuses on the intersection of law, economics, and social consequences regarding college athletics, NIL, and sports gambling. Before teaching, Prof. Henderson was part of a team that amended Illinois NIL legislation and managed NIL collectives at the nation’s most prominent athletic institutions while working for industry leader Student Athlete NIL. He holds a Juris Doctor from the University of Illinois College of Law in Urbana-Champaign and a Bachelor of Economics from Saint Joseph’s University, where he was a four-year letter winner on the golf team. Prof. Henderson is a native of San Diego, California, and a former golf CIF state champion with Torrey Pines High School. Outside of athletics, he enjoys playing guitar, hanging out with dogs, and eating California burritos. You can follow him on Twitter: @NoahImgLikeness. 

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