Growing Business of Sports: Federal Tax Policy in Multibillion-Dollar Industry

The committee will come to order. Today's hearing continues a long-running effort by the Ways and Means Committee of aggressive oversight of our nation's tax code in an area that demands our attention in the two point five trillion dollar global sports industry. From college athletes to professional leagues, sports organizations benefit from a range of favorable tax treatments, including tax exemptions and taxpayer-funded subsidies that warrant congressional oversight to ensure tax dollars are being used as it intended. Today, tax incentives push professional sports teams to prioritize corporate profits at the expense of their local communities and the fans who live there. At the same time, college athletes are facing a confusing maze of potential tax liabilities brought on by the explosion in the use of name, image, and likeness rights, more commonly known as NIL. The coaches, athletic directors, and college administrators to whom these student athletes might turn for advice are no doubt equally unprepared for the unique tax implications of the NIL system, a system worth an estimated two point three billion dollars today. A particularly disturbing piece of this puzzle is how professional sports teams are using tax-exempt municipal bonds to finance stadium construction, renovation, and in some cases relocation, all to benefit their bottom line at the expense of the taxpayer without necessarily helping the communities where they reside. Forty-three of fifty-seven new stadiums over the past twenty years have been built using tax-exempt municipal bonds at a cost of four point three billion dollars to the American taxpayer. In seven of these instances, the team actually moved out of their original locality, in some cases leaving taxpayers on the hook for the cost of the original stadium, but no team. The purpose of tax-exempt bonds is to generate local investment and job creation in the communities where new construction occurs. But the evidence shows that communities are not seeing meaningful return on their investment from the team and stadium relocations that have occurred. Sadly, I must look no further than my home state to Missouri to find an example of corporate greed triumphing over community benefit. The Kansas City Chiefs, who called Missouri home for over six decades, have announced their decision to leave the state and move the Kansas side of the city. This decision, being made, made based on where the team can extract the most taxpayer dollars, reflects the reality that ultimately these teams, or at the very least their C-suite leadership, are more loyal to their bottom line, to their fans. But it's not just the Chiefs. Tax incentives are being used by teams around the country to leverage the communities, They're in for the most favorable deals possible, often without any public benefit. The Oakland Athletics walked away from the city that supported them for nearly six decades, bound for the Las Vegas Strip and up to three hundred and eighty million dollars in Nevada taxpayer money. The Arizona Coyotes asked Tempe voters to help finance their new arena. When those voters said no, the franchise was shipped to Salt Lake City inside of a year. Oklahoma City voters were told to remember what happened when their team used to be the Seattle Supersonics. And maybe because of the concern about losing a team, approved a sales tax to cover roughly ninety-five percent of a nine hundred million dollar arena. While the team's billionaire ownership put in just fifty million dollars, all to keep a franchise that was itself poached from Seattle in two thousand and eight, when the city declined to pay up. The Chicago Bears, they are threatening to abandon Soldier Field and have floated crossing state lines into Indiana to pressure Illinois into a richer package. The Philadelphia Seventy-Sixers spent two years playing Pennsylvania against a New Jersey offer to lure them to Camden, only to reverse course at the last minute. The Philadelphia Eagles are doing the same situation right now. And the numbers only climb. Eighty f- eight hundred and fifty million in public money for the Buffalo Bills. One point two six billion for the Tennessee Titans. one point one five billion land and tax giveaway for the Washington Commanders. Different cities, different leagues, but the same unfortunate playbook. Leverage, threaten, relocate, and repeat. And send the bill to the taxpayer. From jobs to other investments, these actions by sports franchises can cost the local communities they leave behind. Meanwhile, the communities where they relocate end up subsidizing these corporations that are already worth billions of dollars. This committee has also given heavy scrutiny to the benefits that teams are currently able to take advantage of. In the House version of the one big beautiful bill, we included a provision to restrict the amortization deductions of sports-related intangibles. When you factor in all the various pieces that make up today's, college sports experience, from ticket sales to broadcasting rights, sponsorships and merchandising, the modernization and construction of sports facilities on campuses, not to mention the global reach of this whole enterprise, it is a twenty-three billion dollar annual business. It is projected to double in less than a decade to forty-seven billion. All the while, these teams benefit from their classifications as tax-exempt under the U. S. Tax Code because of their affiliation to institutions of higher education. It is this committee's responsibility to ensure the integrity of our our tax code, including the rules and regulations governing the non-profit sector. At the same time, for Americans like today's college athletes who face an uncertain tax policy landscape, We need clear rules of the road they can navigate with greater certainty. I look forward to hearing from today's witnesses about what more can be done to improve the administration and adherence to our tax laws. I'm pleased to recognize the ranking member for his opening statement.

Uh, thank you, Chairman. Uh, the limits of affordability and its crisis in America know no bounds. And this hearing comes at a great time as we have had the honor of hosting FIFA and the World Cup. In fact, I might speak for all the citizens of Massachusetts, now that the Tartan army has returned to Scotland, there's likely to be more beer for the rest of us. No small considerations. But families are paying more for groceries, housing, and health care, all while staring down the most expensive summer of travel in recent memory. On top of that, they're being priced out of our most favorite pastime, Sports. I looked at the biographies of all the witnesses. You know what I'm talking about. You're clear on it. We share that consideration. As we prepare to celebrate the two hundred and fifty birthday of this great nation on Saturday, too many Americans will find that our great national pastime, baseball, has become a luxury experience for the very few. I've seen the transformation of these ballparks. It's unbelievable what's happened. But who can afford the rising dynamic ticket prices that are now in place? Twenty dollars for a beer? Fifteen dollars for a hot dog? Or the billion dollar stadiums that the chairman referenced, that taxpayers are subsidizing? A recent UGov sports survey showed that sixty perc- sixty-seven percent of fans say that attending a live sporting event is now unaffordable. Eighty-six percent say It's become a luxury good rather than an everyday experience. Somewhere along the way, and in some cases collegiate sports and professional sports linked, it became not about filling the stands with fans and making memories for loved ones, including me. Instead, teams have become assets, bought and sold by billionaires, leveraged by investment firms, and squeezed for tax preferences all of while we maximize returns. It must be remembered that none of this exists without fans. They fill the seats, they buy the jerseys, and now they are even forced to buy the special subscription to the channel to keep the games at home. I've seen what cable has done as many more sports franchises go exclusively to that outlet. The fans are the ones who are loyal. Their commitment makes these brands worth billions, and the owners know that. Yet they're being asked to fork over more and more of their paycheck, while owners, again as the chairman noted, demand new taxpayer-funded stadiums, it seems, every decade. Even willing to rip the team from its fan base when more favorable subsidies are offered over state lines. We all want public-private partnerships. That strengthens our communities. But we cannot enter this endless cycle of bending the knee to the whims of the billionaire class. You can't talk about sports in America right now with it igno- without acknowledging the explos- explosive growth of sports betting. It must be examined whether the incentives to participate are serving the fans as has been argued. Today's hearing is a chance to examine whether our tax code is keeping pace with the changing business of sports. We have a responsibility to keep the game with the fans. As a longtime sports fan follows every sporting event conceivable, I'm astounded by the fact that that loyalty that the fans express, even in professional sports when the teams are losing, They show up for these games. Now to be told that in a bidding war the franchise might move across state lines? I think the part of this hearing today is to shed some light on why taxpayers shouldn't be left footing the bill while investment firms continue to grow and keep their fortunes. I yield back.

Thank you. I will now introduce our witnesses. Mister Sam Ocho is a former NFL linebacker, ESPN ESPN college football analyst, and the director of human capital at AWM capital. We have Mister Thad Madden is an NIL tax consultant and former IRS revenue officer and fraud analyst. We have Mister Robert Raiola is a CPA and the director of the sports and entertainment practice, PK PKF, O'Connor Davis, LLP, and we have Doctor Dennis Coates, is a Professor of Economics at the University of Maryland in Baltimore County. I want to thank you all for joining us today. Your written statements will be made part of the hearing record, and you each have five minutes to deliver remarks. Mister Mister Ocho, you may begin when you're ready.

Chairman Smith and Ranking Member Neal, thank you both and the entire committee for allowing me to be a witness today. Good morning. My name is Sam Macho. I'm a nine year NFL veteran, a two time Walter Payton NFL Man of the Year nominee, a former Vice President of the NFL Players Association, and a recent inductee into the College Football Academic All-America Hall of Fame. Currently, I'm an ESPN College Football and NFL analyst, and a family office advisor for the Athlete Family Office. This subject matter matters deeply to me. I'm not a fiduciary of any organization that has an interest in this subject matter, nor do I have any federal grants or contracts related to the hearing subject matter. I'm representing myself. There's a freshman at a school in the SEC who made seven hundred and fifty thousand dollars in NIL money last year. He made all the right choices. He wanted to give his family a new opportunity, so we bought his mom a home. He - she was grateful. As a new student in college, he wanted to get from point A to point B, so we bought a car. He had a desire to live off campus, nothing too crazy, just an apartment close to the facility. So we rented an apartment. Close to where, food to eat, no chains, no Rolls Royces. No excessive spending. He was a kid making good decisions. When the director of player engagement met with him towards the end of the year, he asked the player how much of that seven hundred and fifty thousand dollars was still left. The player said, " I don't know. Let me - let me look at my phone and check." He pulled out his phone, showed him a number. It was six thousand dollars. And no, he hadn't been making estimated quarterly tax payments. So at that moment, the eighteen year old kid didn't know how taxes worked, was left with a three hundred and twenty thousand dollar tax bill, not including penalties and fees. There's also a senior ranking member, Neal, actually, uh, Mister Smith, who went to your alma mater, University of Missouri, Columbia. We sat down a few months ago for dinner. He was getting ready for the NFL draft. I was meeting with him to educate him on how money works and what his NFL future could potentially have in store. He heard me speak at the Senior Bowl in Mobile, Alabama, and was looking for mentorship. He wanted to do right by his money. He wanted to take care of his family. I asked what his NIL deal was. He said seven hundred fifty thousand dollars. I started to talk to him about estimated quarterly tax payments, and the tax bill he had due. He looked at me as if I had four eyes. But it's not all million dollar deals. There was another player at a school in the Midwest who was no longer with us. Nick was a true freshman at the University of Kentucky, receiving a hundred thousand dollars in NIL payments. His family was estranged from him until he began - until he began to be their ticket out. So his loved ones, some of the ones closest to him, began asking for money. He would send money home every week. He had a twenty percent agent fee based off gross income, not net. So twenty thousand went to his agent. When the money ran out, Nick was hoping for a new contract. The team was behind on payments. They had made some promises that they weren't able to keep. And so there was no new contract to be had. They promised the young man an amount that they were not sure they could pay. When the payments didn't come, the pressure persisted. This young man took his life, twenty-two days ago. He was found by Courtney Love, the director of player engagement at - for the Kentucky Wildcats football team. I was on the phone with Courtney last week Friday while on a medical mission trip with my family overseas. Courtney did not hold back. "There's a lot of advantage being taken," he began. "We gotta invite the Lord into every conversation." "We need to help these kids understand that we really care about them." "Not just winning games, we gotta win life too." "Unfortunately, Many players from the states, cities, and counties in which you serve are slipping through the cracks. Not just physically, but financially. Payments are being missed. Lives are being lost. That's why I'm here. This topic matters deeply to me. And that may be why you all are here as well. I propose a solution. The the tax code wasn't written for a seventeen year old college football player who's coming into sudden wealth. Does that mean that we should limit NIL pay? That wouldn't solve the problem. I think this committee is uniquely s- positioned to change college sports in a meaningful way. To do the thing that the NFL Players Association should have done and someone else should have done a long time ago. Congress must act to help these struggling athletes. One possible avenue could be Congress creating a mandatory withholding that goes into a special retirement account for collegiate athletes. This could be a flat twenty-one percent rate for NIL college athletes, and the same as whatever the tax holding withholding amount would be, but it can go into an account that could grow over time. At the end of their time in college, or even at the end of each year, the players could have that money go to the IRS to pay their tax bill. The remainder would be in that investable account. This potential solution would ensure that money is set aside for players, and that the IRS is receiving their payment. Additionally, perhaps players could be preempted from paying the job tax or other state income taxes. At the end of five years or their time in college, whichever is sooner, the remainder of this account could also be rolled over into an individual retirement account that could be accessed at thirty-nine and a half rather than fifty-nine and a half, with the same IRA withdrawal and penalty rules. This way, the player can have access to the money and would be encouraged to save. This potential avenue would also account for the significantly shorter expected duration of earnings that professional athletes face. We should also implement mandatory financial education for student athletes. However, financial education is not enough. We need people like you, members of the committee, to help young people save. Yes, the Committee on Ways and Means is the oldest committee in Congress, but at this point in time, it may be the most appropriate and effective tool to effectuate change. At the end of the day, your goal is to help people, not hurt them, and this committee is perfectly suited to help. Thank you.

Thank you, Mister Madden.

Thank Chairman Smith, Ranking Member Neal, and the other members of the committee for inviting me to testify today. I am flattered and honored to be here to and to sit on such a distinguished panel. I retired from IRS on December thirty-first, twenty twenty-four after thirty-eight years as a Revenue Officer, Analyst, and Program Manager. One of my final projects with IRS was helping to lead an enterprise-wide initiative, studying compliance with NIL income being earned by college athletes. I'll limit my remarks today to the tax implications of NIL, combining my IRS experiences with what I've witnessed working NIL issues in the private sector over the past eighteen months. I'm currently an enrolled agent authorized to represent taxpayers before the IRS. I'm a tax consultant for Scout, a leading fintech company that empowers athletes to take control of their financial future. and I'm a certified service provider with athletes.org. Through these relationships, I've witnessed firsthand the ever-changing landscape of NIL, which enables me to help college athletes understand and meet their tax obligations. I have personally visited universities throughout the country with the scout team for financial literacy presentations, and one-on-one tax consultations. I have met with hundreds of athletes. and school administrators prepared tax returns and represented multiple NIL athletes as power of attorney. One of the misconceptions in the public is that college athletes are employees of the schools they're attending. That's not true. They are self-employed, independent contractors with no taxes withheld from their earnings, which means they need to pay their taxes on their own preferably in the form of quarterly estimated payments. That's quite the ask for an eighteen year old fresh out of high school. Any college athlete who receives NIL income immediately steps into a far more complex tax situation than a traditional wage earner since they're self-employed they must pay social security and Medicare tax in addition to federal income tax whether they earn three million or three thousand dollars, their federal return, form ten forty, can expand to twelve to fifteen pages. Compare that to a young W-two wage earner with no itemized deductions or other income whose tax return might be only two pages long. Many of the major stakeholders, including the NCAA, do not support classifying the athletes as employees. Many in the tax world believe would be classified as employees if the IRS conducted an employment tax examination using the traditional twenty common law factors which focus on control and relationships. A friend of mine recently commented, " It's like these kids hit the lottery." I responded that it might be like the lottery lottery dollar-wise, but not tax-wise, because since nineteen seventy-seven, when someone wins the lottery, or a casino jackpot of more than five thousand dollars, the payer is required, under Internal Revenue Code section thirty-four O two, to withhold twenty-four percent in federal income taxes and remit that money to the IRS on behalf of the winner. In my opinion, any federal legislation focused on NIL should require some form of mandatory withholding from NIL payments. This would be a great service to the athletes, giving them a head start in being tax compliant as they earn their NIL money. During my time at IRS, most individual tax delinquents I encountered were self-employed individuals who had no taxes withheld from their income, usually didn't make estimated tax payments, spend all the money they earned, and lacked the funds to pay their taxes by April fifteenth of the following year. Sound familiar? It's the exact situation student athletes are facing today as they earn NIL income from multiple sources with no withholding. Only a very, very small percentage of college athletes now earning NIL money will go on to play professionally. So this will most likely be the most money they earn in their lifetime. It's hard to imagine. graduating from college and starting out in life with the IRS pursuing you for unpaid taxes. But that's the reality facing many of these athletes today. I'm seeing more and more athletes leaving college with large tax liabilities and no current means of repaying it. I believe federal legislation is needed to address many of the challenges currently facing college athletics. I also believe financial literacy training is essential at both the college and high school levels so that these young men and women at least have a basic understanding of the U S tax system which is built on voluntary compliance. Thank you for inviting me and allowing me to speak at today's hearing and I look forward to answering your questions.

Thank you. Mister Raiola, you may begin when you are ready.

Good morning. Chairman Smith, Ranking Member Neal, and other members of the committee. My name is Robert Riola and I'm Director in the Sports and Entertainment Group for the accounting consulting firm PKF O'Connor Davies a top twenty-five firm across the East Coast. Well, I'm here to talk about a a couple things that has already been addressed, number, the first of which is the NIL income. It's an area that nobody knew anything about five years ago. and now is a very hot area. The gentleman who previously spoke addressed the issue of non-worthholding and you know, an athlete not realizing that he does indeed have to pay income taxes. So, what you're faced to do is to try to limit the tax he would have to pay, but if a a a NIL student athlete gets a million dollars, he's gonna have a lot to pay in income taxes. One thing that we do is we look at his r- sports related deductions, such as agent fees, uh, and other ordinary and necessary business expenses to limit the amount that he has to pay. The amount that he does owe will be paid quarterly, and then reconciled with the IRS on April fifteenth to make sure he is, uh, fulfilled his requirement to file form ten forty and pay the necessary taxes. Not only is it regular income tax, But the student athletes are treated as independent contractors, and they will pay self-employment taxes as well. The- these athletes are not schooled uh on financial literacy. When my children, when my daughter was in high school, she did not take a financial literacy class. However, th- two years later when my son was in the same school, he did take a financial literacy class, although neither of one of them went on to be student athletes in college. So, I think it's very important to - to recogni- to recognize that these - these i- issues need to be addressed, and these athletes need to be schooled on h- how to handle this. I - I agree with Mister Accio, uh, that financial literacy is extremely important, and that's the - the one way that this must be taken care of almost immediately. Um. One other area that we can talk about related to NIL income is the forming of what's called a SEP, a simplified employee pension plan. So the student athlete, if he's made enough money, can put aside seventy-two thousand dollars in a retirement plan and receive a corresponding tax break. That money is treated like an IRA and cannot be touched without penalty until the student athlete is fifty-nine and a half, but it provides tax savings when he's in a high bracket. and it might be worth do doing setting up a plan. The other issue that these athletes face is the the issue with uh family members and entourage if you will. Sometimes these uh families think of the student athlete as a way the way out and they go ahead and try to help the student athlete but o- often putting their own best interest ahead of the student athlete and that does not help the student athlete One of the other areas that I'll talk about is the jock tax. The jock tax, I'm sure members of the committee are familiar with it. It's it's funny because Washington DC has a tax at eight and a quarter percent for residents, but they do not tax non-residents. If Washington DC was to tax non-residents, similar to what uh the state of Seattle uh sorry the the the state of Washington and uh other states have done state recently to try to raise money for their coffers so I think it's important to understand the the jock tax and how it works and important to make sure that it is understood so that student athletes or athletes can face uh, a a road to handling it correctly and not face interest and penalties. Thank you and look forward to being part of the committee.

Thank you, Mister Coats. Doctor, Doctor Coats.

Thank you, Chairman Smith and Ranking Member Neal. My name is Dennis Coats. I'm a Professor of Economics at University of Maryland, Baltimore County. That's UMBC, first number sixteen seed to be the number one seed in the men's NCAA basketball tournament. I am the founding president of the North American Association of of Sports Economists. I am the editor of the Journal of Sports Economics. I am the recipient of the Larry Hadley Service Award from the North American Association of Sports Economists. And just last year, the association created in my honor and awarded me uh and my co-author, the Coats Humphreys Research Award. In my written testimony, I tried to emphasize two issues, the lack of evidence indicating large economic effects from stadiums and arenas and issues with the use of tax exempt bonds to subsidize those facilities. Rather than recap that, what I'd like to do now is to emphasize why this is an important issue and suggest some, um, solutions. First, we seem to be entering a new wave of stadium deals. Just since twenty twenty, three new arenas and five stadiums have opened, totaling over three point two billion dollars in expenditures. The arenas, interestingly, were almost entirely privately financed. But the stadiums, seven hundred and fifty million dollars towards those was subsidized by the state and local governments. That was about forty-two percent of that total expenditure. This does not include stadiums in Buffalo, set to open this summer, Nashville, Kansas City, or those in Chicago that are not quite set yet, and the District of Columbia. As these open, clubs with other stadiums will push their communities to be able to, uh, for a new stadium to a re- for a replacement, more modern stadium, to be able to earn revenues so that they can quote-unquote compete with the other guys for playing talent. They need the revenues to be able to hire the best players, will be their argument. These clubs will inevitably hint at relocation. That may be a subtle hint, or it may be a not subtle hint. As a possibility for leveraging the monopoly power, they have to extract concessions from cities held hostage by the monopoly sports leagues. How much are these facilities actually worth to the communities? Generally speaking, whatever a proponent of building a stadium tells you, move the decimal place one to the left. Another way of saying that, it's about ten percent of what they claim. Some stadiums, or some studies of stadiums use a particular methodology that confirms this sort of result. This methodology is called contingent valuation, and what it does is asks people a hypothetical, something like, how much would you pay to assure that, to take an example, the Jacksonville Jaguars stay forever in Jacksonville, and people provide a dollar value. What we find from these studies is that the typical answer is a substantial, positive number. But it is roughly one tenth of the amount of the subsidy that the team is asking for. So, I'm gonna end with two potential solutions. They're not well thought out in the sense of being very specific in the way that, um, the proposals we've heard from the other panelists have been. The first is address the monopoly situation. Sports teams are able to do what they are able to do because they're the only provider of that service. If you were to look to Europe, you would see that within the City of London at any given time, there are five or six or even eight or nine teams in the top division. I'm not suggesting that we adopt promotion and relegation in the United States, think about the monopoly power that these leagues have. The second thing that I would say is remove the ability of state and local governments to use tax-exempt bonds to finance stadium subsidies this is something that I mentioned in my my written testimony, has been an issue before Congress for forty years. Every time it comes up, there's always an excuse, oh, we've got all of

Thank you. We'll now proceed to the question and answer session. When the owners of the Kansas City Chiefs abandoned Missouri and their local fan base to move across state lines to Kansas, it was a clear-cut example of a sports franchise putting corporate interest ahead of the interest of a community in which it has thrived for over six decades. Many franchises have made similar relocation decisions due to the availability of tax-exempt municipal bonds to finance the construction of of new stadiums at taxpayer expense. And countless more have leveraged communities to achieve generous subsidies that pad teams' and owners' bottom lines, but do little, do little for the surrounding communities. In recent months, just in the NFL, we have seen this dynamic play out with the Chicago Bears and Philadelphia Eagles. We've also seen this in Major League Baseball where Kansas City had to build the Royals a new stadium. The same dynamics plays out in countless other sports. Mister Coats, How do tax-exempt bonds impact the cost of building these stadiums, and to what extent would you characterize these sports franchises as taking advantage of the generous tax benefit to pad their bottom lines while pitting taxpayers in one jurisdiction against those of another?

The tax-exempt bonds work in a very specific way, basically what will happen is state and local governments issue the bonds and because of the exemption they're able to um borrow at a lower rate than the market rate. The idea of the of the franchises is to avoid paying market rates on the interest on the money that they borrow but rather to pay this lower rate available to the state and local government. So what happens is the state and local government borrows the money, uses that money to fund all or part of the stadium construction, and then must figure out how to pay the interest in principle on that bond. The current setting is such that there is a very strong interest for none of the revenues generated by the facility to be used to pay off the interest, because if they were to do so, it would make the bond no longer tax exempt. In other words, if you use revenues generated from ticket taxes or ticket sales or in-s- stadium advertising, concessions, parking, anything linked to putting on the event to pay off the bonds, that would mean that they are no longer essentially public bonds but are private activity bonds, and that would mean that the interest rate um would be higher so what this has done is essentially made it so that local governments have to use other sources of revenue whether it's general revenue whether it's specific sales taxes that they enact in order to fund these things whether it's something like um lotteries or taxes on tobacco and alcohol things that don't have anything to do with the stadium are used to raise

You know, after such general, uh, general subsidies, um, generous subsidies, what impact do the relocation decisions ultimately have on the communities that, that are abandoned by sports franchises, leaving, leaving town? I think of my home state once again, St. Louis, Missouri. Um, they used generous tax benefits to lure the Los Angeles Rams to the St. Louis Rams. And they were there for twenty years, and St. Louis is still paying for that stadium that's empty. That's now, that team has lured back to the Los Angeles stadium. So, as well as the jurisdictions that can put so many resources into bringing a franchise to town, so how, how do you see these communities being affected?

Well, I think that there's two, um, two classes of relocation. And Missouri's a perfect example of both of those. One of those is the case of the Rams, where a team comes in from out of state and then leaves for another state. And the other is the case of the Chiefs, where essentially the team has moved across state lines, but is still within the same metropolitan area. The two situations are similar, but they're also quite different. And the reason that they're quite different is because in the case of the the Rams and St. Louis, if you were a Rams fan in St. Louis, you no longer have a team to support unless you're going to travel to Los Angeles on a regular basis. If on the other hand you're a fan of the Kansas City Chiefs, instead of driving from Kansas City to where Arrowhead was, you're gonna drive across the river to the other side of the city. So the fans in Kansas City are, in some sense, not any worse off. That's not the same thing as saying that it's not a bad thing for people in Kansas City on the Missouri side versus on the uh Kansas side but the situations are different how is it that they're better off in in Kansas well if you believe that there are large economic benefits from having the stadium there then they're going to generate those kind of benefits in Kansas as opposed to in Missouri I don't believe there are such benefits and I will be happy to talk about the evidence for that. So in that regard, I don't think Kansas is really getting anything, but I, except for the bill. The flip side of that is what's Missouri losing? And the answer is, well, there were businesses there. Those businesses that built up around Arrowhead, that catered to the fans going to Arrowhead, probably will have fewer patrons, specifically on game days, those businesses will lose. The problem with that metropolitan area, and I I don't know the environment sufficiently well to be absolutely certain about this, but suppose that a fan from, I don't know, let's say the Las Vegas Raiders comes to go to a ga- a Chiefs game. Where do they stay? If they stay in downtown Kansas City on the Missouri side, both before and after, Missouri hasn't lost anything. If on the other hand they move and start going to hotels, staying in hotels on the Kansas side, Missouri does lose something. So the economic impact is complicated here because of this cross-border but same metropolitan area in a way that most relocations are not complicated.

The the original one big beautiful bill, um, that was approved by the House last last year included tax reforms that would have reduced the size of deductions franchise owners could take against their personal tax liabilities, when purchasing a sports team. Um, right now those team team owners are allowed to amortize the goodwill of their fan base even even though history shows that teams' fan bases are durable, over time. These team owners often earn vast amounts of money through completely unrelated businesses, and this provision allows them to shelter that income from tax just because they also own a sports team. Ultimately, this provision, known as franchise amortization, covering intangible benefits like player contracts or or TV rights, was dropped in the version that was ultimately signed into law. Mister Arreola, does it make sense for taxpayers to continue to provide sports teams owners with such a lucrative tax benefit that allows them to sharply reduce their overall tax liabilities particularly when much of that liability may be completely unrelated to their team ownership?

Thank you. Um, what I what I believe is that I don't think that the sports owners should be able to shelter their individual income with the goodwill and other intangible assets, sur- sur- such as contracts in - in doing their income taxes. This is an area that's talked about often, and I know the one big beautiful Bill has spoken on it, and I think that this is something that can be further attempted to remove at least part of the deduction for the amortization and uh, goodwill, uh, in that extent.

So, today's student-athletes are navigating uncharted wa- waters, as was testified, um, in this new name, image, and likeness, um, landscape. Um, Mister Accio, from your perspective as a former player with personal knowledge about the various challenges and opportunities athletes face, where do you see there being significant gaps in and the type of information that college athletes have access to and need in order to to successfully navigate the NIL environment and and comply with applicable tax laws. And do you see there being a role for Congress to to play in ensuring access to that information, or or should this be primarily a role of the educational institutions they attend?

Thank you for the question. I absolutely do see Congress having a need to step in. Uh, I was at Baylor last week or two weeks ago doing financial education with the revenue-generating sports men's and women's basketball along with football. And yes, there was an audience, but you can imagine seventeen, eighteen, and nineteen year old kids aren't the most captive audience when it comes to finances, even if they're making the money. And so, specifically, I think the education does need to come around taxes. Many of the players who I work with on the family office side, even players who I advise when it comes to NIL, they have very little knowledge about taxes. There's a young player who plays for Kansas State, a seventeen year old just turned eighteen. I was on the phone with his dad two days ago. And one of the questions we had, he had for me was, hey, do I need to file in as an LLC or an S corp? Or, like we're working with, I mean, it's, these guys are now becoming small business owners. And so these are the constant and consistent questions that many athletes and their families, these small business owners, don't have answers too. And so when it comes to educational institutions, they are doing their best, some of them are doing their best to try to educate athletes, but many educational institutions are trying to do their best to win games and not worry about the athlete. These athletes are just rented players. And so if these ed- educational inst- institutions aren't putting their focus on educating athletes when it comes to taxes I do think that someone needs to do that. There is no players association for collegiate athletes that is active and running uh at a large scale. But Congress, and specifically this committee, the Committee on Ways and Means, has an opportunity to continue to educate these young people, these small business owners, on how taxes work and maybe one of the ideas we heard is maybe withholding some of those taxes at a certain rate. And that way they're not having to worry about realizing if, okay, are these taxes real, do I get punished, penalized. I haven't heard about it. My coach didn't tell me. My agent didn't tell me. Very many agents are not having any conversations around taxes. My financial advisor didn't tell me. Most financial advisors, they say go and consult your tax attorney. Go to any website of any publicly traded Wall Street firm. Look at the bottom of their website. It'll say, before you make any investment decision, contact your tax professional. So now you're asking an eighteen year old, seventeen year old, twenty two year old kid. who has a trusted financial advisor or a trusted agent or a trusted coach to go and contact their financial advisor or s- go contact their tax professional, in which they don't have. And so there's something being missed, and no one wants to touch those waters, and I think that's where Congress can step in and help these young people.

Thank you. Under under state tax rules, including the so-called jock tax, um in California, where the Super Bowl was played, some of the Seattle Seahawks players actually lost money by winning the Super Bowl. So, Mister Raiola, how much did Seahawks quarterback Sam Donald make from winning the Super Bowl, and how much did California tax him for playing in their state?

Sure. Uh, Sam Donald is a highly paid player and California has the highest tax rate in the US is thirteen point three percent with an additional one point one percent for state disability insurance making the total fourteen point four percent. Mister Donald earned a hundred and seventy-eight thousand for winning the Super Bowl and the other playoff games, but he wound up paying two hundred and forty-nine thousand dollars in income tax. You may ask how is that possible? The Seahawks will play games in California later in the twenty sixth twenty seventh season so they they count in the equation and they're entered into as part of the the amount of tax that he'll pay and it seems ludicrous that you can play in the Super Bowl and make one amount and yet pay income tax at a higher amount but that's California for you

it's it's crazy to think that winning the Super Bowl cost him money It cost him money to win the Super Bowl because it was in California. Um, starting next year, under IRS tax rule one sixty-two M, sports teams that are publicly held will not be able to deduct up to five player salaries in excess of one million dollars. Those teams have expressed concern that that this provision puts them at an economic disadvantage to the teams they directly compete against. And so, s- and so the committee is considering how best to level the playing field. One approach would would be to um apply one sixty-two M limitation to all sports teams, not just the the publicly traded ones. Um, but Mister Raiola, would this resolve the potential competitive disadvantage teams are currently poised to face under this provision and roughly how much revenue would such a change bring in for the federal government

that would bring in a lot of revenue um i think you mentioned taxing not you know one sixty two m and public corporate public companies i think if it was set up so that that would be on all franchises under the top five paid employees that would raise uh i can't even imagine how much money it would raise but i think it would be uh a step in the right direction and I don't really see why it's only on publicly traded companies. I believe it should be applied to all companies that owns professional sports teams.

I think it's only under the Atlanta Braves and the Knicks and um, another team in New York, but the Rangers. Um, I now recognize the ranking member.

Thanks.

Thank you, Mr. Chairman, um, I thought we were doing great until the California topic came up. And the reason for that is When Walter O'Malley took the Dodgers out of Brooklyn, and Horace Stoneham took the Giants out of New York City, I don't know anybody who would argue it was based upon just good will and good feeling. Those were two spectacular business decisions that transformed professional sports, and also richly rewarded all of those players. I suspect that Willie Mays was doing a lot better in California than he was doing in New York City. I think that's a pretty plausible argument. But back to the original intent here. John Calipari had a great line recently. I know him, at great years at U- University of Massachusetts. He said he had just gotten used to managing parents. It looked as though he was gonna have to start getting used in college basketball to managing grandparents. I think that's clear and consistent with the testimony uh that has been offered. So as Doctor Coates pointed out, The bidding war is always the same. It's about the fans. It's about the person who is selling peanuts and pennants, pennants outside of the ballpark. We all know better, but that's where the political argument always goes. Nothing to do with the luxury suites, nothing to do with the naming rights. But then again, the naming rights are only good for a period of time when the name is then taken off. if there might be a better deal for sponsorship. Mister Rochelle, you pointed out the frailty of what happens to these kids. And you're right on target. But the incentives are misplaced too, in terms of how the application plays out. So the American people, to their everlasting credit, have the highest tax compliance in the world. Eighty-six percent of the American people as Mister Madden would point out from his IRS days, pay their taxes on time. And the reason for that is withholding. That's the genius of the withholding system. And that's why the problem at a lot of young athletes, it's not isolated from a lot of star entertainers. They have many of the same challenges. But Professor, Professor Coats, let me take this back to the point that I I made at the beginning. Public financing of stadiums. We've seen it. There's the threat of moving the chairman's right, and then they leave, or they say they're gonna leave and in some cases they really do leave, and the sports fans, the loyal fans who show up week after week, sometimes day after day, they're left with a pretty implausible explanation. But you pointed out that private sports enterprises generally are a losing proposition for taxpayers and a winning proposition for the owners. Let me ask you this, and I assume your first preference is to end all of these subsidies, but assuming politically that that isn't possible, what should these localities be asking in return from these teams? How can state and local governments, who are really exposed for the success or the failure of the teams as they move around, draw some general benefit, if not specific?

Thank you for the question, and if I was God I would probably have a decent answer, but I'm not, so I'll give you the best answer I can, and that is to hold the line. The problem really is that cities accept this bidding war process. All it takes is for the city managers to all say no, we're not doing that." So that it stops. But everyone, this is a very standard sort of what's called a prisoner's dilemma situation, all it takes is one to violate that agreement to say no, and then the whole thing falls apart because that one that fails to say no gets a stadium or gets a gets a team relocated. So it's a very, very difficult problem, um, but it's one that could be solved, I think, through agreement amongst state and local governments to not agree to subsidized stadiums, and to the extent that this is a possible thing for Congress to do, to make it impossible for state and local governments to compete in this way. Whether that is in fact constitutional, legal, I I'm not a legal scholar, I'm not a constitutional scholar, I don't know, but I think that that would would resolve this problem.

Yeah.

Just take away the ability to allow teams to back up the the Brinks truck to the

Well, that's about it.

local treasury.

So the witnesses, your testimony's really been great, all of you, so we we're all very good at finding the problem. on to trying to figure out the solution. Thank you.

Mister Buchanan.

Thank you Mister Smith uh for today. Mister Aikol I was gonna mention to you as uh one person up there that's a player I wanted to get your thoughts on a couple of things and then I'll get on the finance side for a couple of minutes but I everybody has a different experience they bring here, but I had two sons that played division one football for Bobby Boughton Florida State and Pe- uh and Stanford. And one of the things I don't think it's talked enough about, and maybe that's not the place for it here, but it needs to be said, the risk these kids take on the field every day. And there needs to be as much consideration we can give them as possible. I've seen it. This is their whole life. And the reality of it really hit home with me. When you see a freshman, a redshirt freshman going up against a fifth year senior, My son was a r- top rated fullback in the country, and he would meet this guy in the in the hole, uh doing goal line line stances and stuff, uh and his name was Monster, uh big kid, and they're five years apart, and at the end of the day we had seven kids that were division division one kids, most a lot of them were uh exceptional athletes and everything, and at the end of fi- five years there was one left, offensive lineman. Uh and then I went to read a book on Penn State, somebody had written a book about Penn State and they had followed these kids from their freshman year through a period of five years in their red shirt year, and there was like one or two left. So these kids are, there's a few kids getting rich, they're doing pretty good, but there's a lot of kids putting themselves at risk. In my situation my son had a concussion for two months, he couldn't go out of the house, uh he had to stay in that way, but my, that happened with a lot of these kids. And we just gotta keep that in mind as people are making billions of dollars on the other side. What are we doing for the kids? It's we should have a way of making sure they they get taken care of, cuz otherwise you wanna have people in the stands. What's your thought?

Thank you, Mr. Buchanan. Uh, I spent several years a part of the NFL Players Association fighting for players' rights. I sat down in front of the billionaire owners negotiating collective bargaining agreement and so this idea of player safety means very much to me. I also currently sit on the side as an ESPN analyst and so I understand that TV contracts are also helping to increase the revenue for these uh these teams. And the problem with these TV contracts is well how do you make more money? Well you need more games, you need more games, well that means players have to play in these games and now players are accepting the brute of not just a ten or a twelve game season when I p- I went to Texas. And I played and back when I played, you know, the last game of the season was the rivalry game, Texas versus A and M on Thanksgiving. Glad, I'm glad that game is back now. That was the last game. And then maybe you got a chance to play in one bowl game, so about a twelve game season. Well now all of a sudden, with the new expanded college football playoff, a team could play in seventeen games. And imagine if you're playing for a coach like Bobby Bowden or a coach who's gonna have you consistently in the college football playoff, Now all of a sudden you're playing seventeen games, year in and year out. That's five extra games for possibly five years. That's another season plus that these players are subject to potentially being injured. These young people have chances for concussions, lower extremity injuries, and very limited idea of is there health insurance for these players that have a short earning window. And so I do think there needs to be someone speaking up on behalf of players. Everyone gets all caught up in NIL and transfer portal, and these players making all this money, but you rarely hear about number one, the players who are getting kicked off of teams in order to rate room make room for the other players.

That's okay.

Nor do you hear about the players who are getting injured and not able to c- continue their career both ath- athletically and also academically. You think about your son.

Yeah, let me just say, I would just say one one big thing is that they need to give these kids a net number. When they pay them, let the the big guys pay the taxes. If you got someone's make making a A million or two, a lot of them are coming out of in the pros, uh so what if they gotta pay four hundred when they build a gigantic stadium? Take care of that so they don't get buried in this because ninety two uh, ninety two percent of small businesses uh that start business go out of business. That's based on the US Chamber, so a lot of them get caught up they someone talks them into this business deal, or this thing or whatever, and before they know it they've lost most of their money. That's what I've seen, and I was in a bit in the business we franchise uh businesses across the country, we had a lot of players, so I seen when they'd come in they'd be here and then over a period of three or four years it'd be completely different.

Of course. Thank you.

But I just wanna make sure we don't leave the players out of the discussion, because they're the ones making the the opportunities to build these big facilities, and the minimum w- the minimum thing we should do is take care of their taxes as it relates to so they get a net number at least for the first couple three years, and put it in some kind of a fund that'll be there for uh going forward. Thank you.

Thanks.

Thank you.

Thank you, Mr. Thompson.

Thank you, Mr. Chairman, thank you to all the witnesses for being uh here today. You know, clearly sports are one of the few things that bring Americans together across every background and every community. Inspire young people, strengthen neighborhoods, and create memories that last a lifetime. But they're also an enormous economic engine. In my home state of California, sports support hundreds of thousands of jobs. From the people working concessions and security, to hotel employees, restaurant owners, broadcasters, transportation workers, and countless small businesses that benefit when fans come to town. As California prepares to host the Super Bowl and the twenty twenty-eight Olympic Games we have an opportunity to showcase not only our athletes, but our communities and our local economies. That's why today's discussion matters. Our responsibility on the Ways and Means Committee is to figure out whether the tax code is keeping pace with the changing business of sports. Are taxpayers getting value when federal tax preferences are used to support stadium financing? We have to ensure that young college athletes understand the tax obligations that come with earning significant incomes through name, image and likeness. It also means understanding how new business models surrounding sports affect our broader economy. As prediction markets continue to emerge, Congress should understand whether they're creating new economic activity or simply shifting dollars away from existing businesses, including local restaurants, hotels, entertainment venues, tribal gaming operations, all the things that support jobs, public services, and regional economies. Innovations should strengthen communities, not inadvertently weaken the local businesses and workers who have long been part of the sports economy. Sports have always evolved. Our tax code should keep up, and it should evolve in a way that supports communities, protects taxpayers, promotes fair competition, and gives young athletes every opportunity to succeed both on and off the field. This has been an interesting uh hearing uh, Mister Chairman, but what it uh what it tells me is we need a lot more. I mean we've the the the discussion we've had on uh how these young athletes are put at risk, uh that w- we could spend a whole hearing dealing with that issue, how communities are advantaged or disadvantaged, because of the tax provisions that help them uh fund uh new stadiums. Uh all of this is uh i- i- i- it's a lot uh to be dealt with and it, as I said, it could take a whole hearing on any one of these uh specifics. So I wanna thank the witnesses who came in. Uh your testimony's been uh enlightening. Mister Chairman, thank you for holding the hearing. And uh I hope we can figure out some ways to both protect the taxpayers, protect the communities and all the businesses that benefit from this industry, and as has been pointed out, uh the young people, uh who are uh really at risk in a lot of different ways, uh from both financial injury and physical injury. Uh we've got a lot of work to do. So thank you all. You're back.

Thank you, Mr. Smith.

Thank you, Mr. Chairman. And certainly thank you to our panel and uh everyone for taking time. here to have a conversation that uh we we need to have. Uh I think we know that uh there's probably several individual hearings that could branch off from what we've already discussed here today. And and that's uh we haven't even talked about naming rights of of stadiums or or facilities uh naming rights obtained by a non-profit organization. That just seems a a little bit uh distorted i- in my opinion. Uh, but fact of the matter is there are a lot of moving parts here. Um, but it all boils down to taxpayers, individuals. Mister, uh, Acho, thank you for humanizing, uh, these issues. I think it's, uh, I don't wanna get too critical, cuz I don't claim to be an expert or a board member of the NCAA, but it, it just seems to me like maybe individual players' interests could be better represented than what we've seen from the old version, pre-NIL, to the current version, and then obviously kind of the the wild west in in terms of what the policies are. And so, uh, my my question, uh, Mr. Madden, uh, would be, you know, on the collectives that, uh, have in terms of tax purposes have been treated differently through over the last few years. Would that be accurate?

Yes, there was a there was a mis-classification and I think a misunderstanding when the applications came in, and this is only from my experience when I worked for IRS, so I don't know what's happened uh since I retired. Um, but NIL was so new, no one really knew exactly what it was, that's part of the reason we formed the task force, to identify it as an emerging issue, but um uh co- some collectives, a number of them were mis-classi- or were erroneously issued tax exempt status. And I think that was because of the of the newness of the of the NIL ecosystem,

Sure.

if you will.

Understandable, certainly. So, could you give us an update, you know, overall of where things stand today, and do any NIL collectives still operate as tax exempt organizations? Uh, and are boosters still able to make tax deductible contributions to support athletes through the collectives?

That that I do not know. Um, but I can tell you, and I think it's, it's been well publicized, the O- the Office of IRS Chief Counsel in June of twenty twenty-three issued an official memorandum stating that for the most part collectives should not be granted tax exempt status and - and the general reasoning behind that is the collectives were - are essentially boosters that have always been there,

Yeah.

but since the the Alston case, the Unanis Supreme Court decision that allowed athletes to monetize their name, image, and likeness, and the NCAA's decision shortly thereafter to allow them to be compensated, that, that created the collectives, that led to the rise of the collectives. And, um, many of these collectives were just, you know, the boosters pooling their money and paying the athletes so that there would be the best possible team field or the court, and they were compensating them for making appearances, maybe autograph sessions or al- attending alumni events or visiting maybe a children's hospital around the holidays or visiting a sports camp in the summer, but paying them hundreds of thousands of dollars to do that. And that was not within the g- the good of the community or a strictly educational purpose. It was deemed to be for the financial interest of the players. So that that's the reasoning behind IRS chief counsel taking that position.

Mm-hmm.

I do not know, I haven't had any real contact with collectives other than trying to help individual athletes uh secure their ten ninety-nines, or determining uh determining the correct amount that a collective puts on a ten ninety-nine. So I don't know how many still might be operating as uh non-profits under five O one C three. But I can tell you from visiting different universities and having contacts with administrators many of the collectives since the house settlement and the creation of the web share where the schools can compensate the uh athletes directly many of the collectives have gone away have ceased to operate, especially at some of the smaller schools.

Mm-hmm, sure. Well, my time is running out. I I think there are many more discussions to be had. I mean, royalties that are that are levied by uh uh institutions as well in in ways that uh I certainly have a lot of questions. But uh as it relates to overall taxpayers, local economies, um uh obviously athletics uh is a unifying uh sports or a unifying uh factor for our country, uh e- even soccer unifies uh. Uh so I I'm grateful though that uh we can have this discussion, look forward to further discussion. Thank you. Uh you're back.

Mister Larson.

Uh thank you, Mister Chairman, and uh Uh, I wanna thank all the witnesses for your testimony. And, uh, uh, Mr. Chairman, I wanna I think it's clear that everybody is empathetic to, uh, what transpired in, uh, your state and what's happening across the, uh, nation. Uh, I'd like to, uh, associate myself with the remarks of, uh, Mister Neal, uh, af- after we heard all the testimony. As is typical in Congress, uh, we hear a lot of testimony and a lot of, uh, what's going on and what's wrong, and then hear very few solutions to how we, uh, solve the problem. And, uh, I know my colleagues are probably trying to figure out how I'm going to work Social Security into this issue. So, uh, I just want to be clear that, uh, Mister Madden, do uh students uh do these young athletes uh uh do they are they subject to FICA taxes? Is social security taking out?

Yes, they're considered self-employed individuals, so they would be required to report and pay a self-employment tax, which consists, as you know, of social security, FICA, and Medicare tax.

And so that is the re- and is it taken out when they get paid?

Oh, it's not taken out. There's no withholding. So they're - it's their ultimate responsibility to report

Right, so

that on their federal income tax return and - and pay it. Yes, fifteen point three percent.

Yes, and so it - therein lies a - another problem waiting for a solution. And I think it's incumbent upon us, but I would - I would just add, and, uh, uh, that for over uh five million Americans they get below poverty level checks from social security. For forty percent of all Americans, the only pensions they'll receive are their social security check. Uh and uh we do have solutions for that. But we need to spend time on this committee hearing and putting those ideas forward and voting on solutions. Um, that's where the, uh, answers lie. And again, I commend the chairman for, for bringing this up and the problem that exists out there, which, when you hear the testimony, becomes self-evident. But if you're that American couple sitting across the kitchen table trying to make ends meet, I'm I gotta think you're probably not focused on this uh and the problems of a young athlete who comes into enormous sums of money. You're still trying to figure out how you're gonna make ends meet. And especially with an illegal war going on and gas prices soaring out of sight. With uh social security not having been addressed. in over fifty five years in the recent social security report coming out again and now concluding that within six years just six years everyone in the country will lose on average five hundred dollars per month from their social security check. Now that will not impact a a student athlete immediately, but it will over the long term and have a tremendous impact on this country if Congress does not act. And this is the sole responsibility of the United States Congress, and I believe in this committee and on both sides of the aisle, there are solutions here for us to solve the problem. What it takes is the will to do that. And it's my sincere hope, uh, that this committee, facing this directly, has a problem that's directly in front of us, and we are the committee of cognizance that we take action on that. And with that, I yield back my time.

Mister Kelly.

Thank you, Chairman. Uh, thank you all for being And I know your your career, nine years in NFL, four years in college, four years in high school, probably started a little midget football and worked your way up. So it's a lot longer than just nine years in NFL. And to get through that is quite a test. But today's uh hearing really is about math. Who's paying taxes on what? And what are we not seeing and where should that where should that reference go? So I like Mister Neal when he started off today. I can remember an article by a guy named Pat Livingston in the seventies when Major League Baseball And the question was, who does the game belong to? And the owner said, oh it belongs to us because we're the ones that fund everything and uh, I mean, come on, uh, we're the ones that put the money up front. And the the players said, no, it belongs to us because we're on the field and we're doing everything we can to make sure we can win and and to keep our position. And Mister Livingston came up with the idea, he said, really, uh, neither one of you are right, it's up to the fans. Cuz when the fans start deciding not to attend, not to be paying to be there, then all of a sudden there is no such thing as a professional sport. And I uh, I really decry what's happened to college athletics. I I like the fact that the NCAA, they started off really because of injuries. That was a concern back in nineteen ten. It was about injuries, it wasn't about revenue, it wasn't about a TV deal, it wasn't about getting out of college football and turning it over to the networks, because it was so much money to be made. I think the last thing in their concern was really athletes and who who was playing, paying who for what, and how what were the tax consequences, because it's always going to be about the tax consequences. And every one of you today that has come here to speak on this, Mister Rochelle, your concern is that what happens to these kids after they're out of school, what happens when they sign an NIL, whatever it was, and this was not a big deal in the past, as you know, when you used to get recruited for by uh to our college, you couldn't accept a hat or a Tshirt or anything, you could accept transportation to get to the school, lodging while you were there, and your meals. Other than that, nothing was allowed to change hands. And then we started looking at the math and the NCAA said, wait a minute, this is worth a lot of money. So whether it's, whether it's the NCAA or professional sports, it's about the money. I will tell you this, I really this in this age of AI, all the states are competing to get these companies to come to their state. Why would it be any difference than people who have some type of an entertainment system. Why should we say, no, you gotta stay where you are, even though you have a better offer to go someplace else, because it truly is about the math. It truly is about the math. Now I uh, I think there's so much to cover today, and Chairman, thank you for letting me get into it. There's so much to be be looked over. I would say the most vulnerable of all this are the players. They're always one play away from never playing again, so they have to try to somehow secure their economic future. And uh, so I don't know that any of you have an idea because this is, what we're talking about today is tax revenue. It all comes down to who's paying taxes on what and are we charging them enough, and why shouldn't you, if you play in Chicago but you live in Pittsburgh, why shouldn't that day that you spend in Chicago, why shouldn't you be taxed for that time being there? This has become so complicated, but the real complication lies in the fact that it's about money. It's about tax revenue. It's not really about the players. As long as they pay taxes, we're okay. I don't care if they're eighteen years old or or thirty years old. Are they paying their fair share? I get so tired of hearing about the fair share. Uh, and everybody worries about the fair share. I don't know what the fair share is. I guess it depends what neighborhood you live in, uh, or where you've grown up. So, Mister Archer, if you could just start off, because we really do do need, whenever Jack Swarbruck was here from Notre Dame, his number one concern as he was going, uh, retiring from Notre Dame, was the financial affairs of students right now, because of NIL and that they didn't have any compen- any comprehension of what was on the table for them and - and I love agents - agents do a great job because they got pay - they could pay for what they negotiate - going forward, and each of you, you're all here today for the same reason. What can we do? What can we do to make it more understandable about what this is? This is a revenue raiser, first of all for the owners and everybody else, but also at the end of the day for the players. So is there anything that would simplify this? And I agree. that this is far more complicated than the hearing we're gonna have today. So, Mister Roger, first I wanna thank you, what you're doing is incredibly important for these young people.

Thank you so much, Mister Kelly. The first thing I would say is that I think that players need advocates, not fans. Even in my time in the walls of ESPN, some of the biggest names you see, the guys you watch who broadcast the game, they're fans. They cheer, they boo, they laugh, they cry, and that's okay. But oftentimes you're in the white lines on a football field. A fan cannot help you. Uh, even a family member cannot help you. Your mom can't help you. Uh, when you get an injury. My - my third year in the NFL, I was playing in the Superdome, playing the New Orleans Saints. I'd just got a sack on Drew Brees. I was fighting for a spot and I felt like I'd earned my spot. And beginning of the third quarter, I break my leg. out for the season. In the NFL, year three is your contract year. And so I was hoping for a huge financial gain. Well, all of a sudden that opportunity was done. It was ended, at least from an athletic perspective. Thankfully, I was able to go to a school, undergraduate, and even uh high school that had a great education. So I was able to use my mind and start doing stuff on TV, the local station. I said, " Hey, I'm Sam Macho. I'm the starting linebacker for the Arizona Cardinals. I just broke my leg. Most players, when they get injured, they disappear." the ship set sail, there's a business that needs to be had, it's about the money, I said I'm not gonna do that. I'm gonna be going around uh really building what I call human capital. So what I would say, Mister Kelly, is that players need more advocates for them, maybe people in these seats who can help them, yes, pay their taxes, understand responsibility, that's important, but also help them help them understand that you're more than just what you do on a football field, or a basketball field. Mister Larson, you made the example of social security and that's extremely important. I think that withholding some of this revenue could go towards social security and it should. The p- the the the money that players pay. That's part.

You what?

Sign me up, right? I'm already paying my share. But but but also in addition, someone had mentioned the idea of the the family sitting at the table at dinner. They may not be worried about the collegiate athlete making millions of dollars. But I would also argue that that family, uh, may have kids who may go and play in a sport. Maybe it's rowing. Maybe it's lacrosse. Maybe it's women's basketball, maybe it's golf. Maybe it's at a school where they can go and cheer on their their friends. These are classmates, these are friends. And so my position, that's why I do what I do, is I wanna be the most trusted advisor in an athlete's life. I wanna be able to speak up for those who cannot speak up for themselves. And I think if more of us could do that, all of a sudden we'll start seeing our society start to grow, our young people, these small business owners in our cities and our communities, we'll be able to be the example for them and be able to step up and stand in the gap, because the schools are not doing it,

Got it.

nor the coaches.

Well said.

Thank you. Mister Schweikert.

Thank you, Mister Chairman. Um, Sam, most impressive thing you did, an MBA at ASU.

Thank you.

Uh, also the same. All right, now, now let's actually walk through first a, a little set of the scale of the math we are facing and, or excuse me, we are avoiding. Um, United States will probably borrow about six point three billion today, just today, and every tomorrow, and the next day, and the next day. Um, if I'm doing my quick calculations right now, the math I'm looking at on, um, uh, uh, tax exemption on stadiums, um, maybe three hundred million, um, this year, you know, uh, because it's what, four point three, but it's divided over twenty, not a ten. I don't know why it had a twenty year score. So, we had some scaling issues. So if I turn to all of you on the panel and said, alright, let's just do some solutions here. Here are my solutions of hey, um, just as I won a lottery, um, we're gonna go just to an automatic withholding model, um, on these types of contracts. Um, yes, multiple of you, many of you have actually said some um, financial education. All right, terrific. Um, what would each of you do, both on the athletes and how we avoid the difficulties here, and then the subsidies of allowing tax-exempt bonds, tax-exempt organizations on these, what would you do? So let's start with you, Sam.

Thank you, Mr. Schweikart. I would start with the automatic withholding, but also with allowing that money to be held in an investable account. and similar to an individual retirement account. Here's what I mean by that. Some of that money would be withheld. Maybe these are two separate conversations, right? But that money would be withheld and set aside to go to the RRS, but it would be an idea and an opportunity to show athletes what saving looks like, show athletes how money can grow. In an, i- i- in an IRA, money can be invested and it can grow.

OK, so, so here's my withholding, a mandatory, um, uh,

Yes, sir.

to a retirement account and here's your income.

Yes, correct.

Okay. Mr. Madison.

I'd continue to advocate for the mandatory withholding. I think it's a great tool. It's, as, uh, another member said, uh, it's the reason, withholding's the reason we have an eighty-seven percent compliance rate in this country. Um, I have seen one major university that offers withholding to their athletes. Um, they'll - they will withhold thirty percent or a lesser amount, um, or the athlete can opt out. Um, I've seen a collective that will make estimated - quarterly estimated tax payments on behalf of the athlete,

OK, so -

unless they opt out.

So,

I've sug-

mandatory withholding, would you actually move to a, um, obligatory retirement account?

I would think the mandatory - I'm a tax guy, so I would say the mandatory withholding should be submitted to the IRS as it's withheld or on a quarterly basis as as employers do to the IRS on behalf of the act.

OK, so that's the tax side. Anything on on retirement side or or investment side or compounding of interest side?

I'm not an investment counselor,

OK.

but I do know that the greatest asset in investing is time.

What would you d-

not timing the market, but having

what what would you what would you do in regards to tax exempt organizations and tax exempt entities on on stadiums?

That that is beyond my area of expertise, so I don't feel comfortable offering my opinion on that issue.

All right. Um, let's roll.

I think it's extremely important, which uh Sam mentioned, that you do have some sort of withholding. The issue to be careful with with the withholding on NFL players, NBA players, NBA coaches, when they get a bonus, the tax is only withhold at twenty-two percent. So, when it comes time to do the return, up to a million dollars is only withhold at twenty-two percent, and then they go above to thirty-seven percent, once you're above a million. So if you only have, if you're making in the millions, which most people in the NBA are, you have an issue with not having enough withholding. I think education and sitting down with the student athletes is uh of utmost importance and the more you can teach them or the key family member,

OK.

the better off you are.

Alright, so some type of mandatory holding and um doctor, what would you do?

I haven't thought about the NIL issue and the the withholding, um so I don't feel competent to answer that question. With respect to the tax exemption issue, um I would do away with it for stadiums for sure.

OK.

Absolutely do away with it.

Right.

As you mentioned, that doesn't raise a lot of money, and if we're trying to to fill the budget deficit, that several million dollars a year just isn't gonna cut it. On the other hand, I'm fairly com comfortable saying I would do away with tax exemptions across the board. And if you wanna subsidize any of these activities rather than exemptions, I would use um something that Congress could do, which is a budget item every year. Now, state and local governments would absolutely hate that, and they'd hate that because they couldn't be sure the money was coming. But that would mean two things. One, it would mean that you didn't have the distortion that a da- tax exemption generates, and two, the amount of money that's subsidized through the tax exemption is um less than the amount of money the federal treasury loses.

All right, we're we're up against our time. Um, thank you for your patience, Mr. Chairman.

Thank you, Mr. Davis.

Thank you, Mr. Chairman, and I certainly want to thank you for calling this hearing as the representative, the congressional representative for the Chicago Bears, the Sh- the Chicago Bulls, parking lot for the White Sox and for the University of Illinois at Chicago. Uh, sports and athletics are very important part of what goes on in our city across the board any way you look at it. And then, of course, we've got the Cubs over there also. And - and so it's big action, big time. So I think all of the witnesses Mister Mann, I especially appreciated your testimony because you raised important concerns related to this new group of taxpayers who have new resources and in some instances, a lot of them who are essentially being put in situations that create tax debt without guardrails, and we've talked somewhat about that. to help these young adults understand and comply with their tax obligations. Of course, as contractors, these young adults must pay the full self-employment tax and then have very complicated tax returns and tax obligations that many of these young athletes and their families are not familiar with. and don't necessarily think a great deal about usage at the moment. We've already explored in some ways recommendations and suggestions, but do you have any other things that this committee perhaps could do to make sure that these young taxpayers don't get themselves in more trouble than necessary?

Well, I I keep h- uh, thank you for the question, Representative Davis. I keep hark harking back to the withholding, but the financial literacy piece, I don't know if this committee has any authority in that regard. Um, I know me- from experience many states uh mandate financial literacy training um at the high school level, but I also know that many of the states do not fund it fully. I talked to one colleague uh that told me in her home state the financi- financial literacy requirement for high schools is handled during norm- uh morning announcements of all places, which is totally ineffective. Um when I was in high school um many years ago we had a social studies teacher, I believe it was our junior year, but during tax filing season one of our assignments was he handed out blank tax returns gave us Mach W- twos and ten ninety-nines and the assignment was and on a tax table and an instruction booklet, and the assignment was complete a ten forty income tax return. And I still remember that to this day, I don't know if that's why I I uh had a thirty-eight year career with IRS, um but it it certainly stuck with me and I know for a fact things like that are not being done today so anything that can be done uh for financial literacy, like I said, at both the high school and the college level because it hasn't been mentioned yet, but NIL income is filtering down to high school athletes.

Thank you very much.

Um

Um, Mister Coach, in your testimony you talked about how federal tax exemptions cost the federal government revenue. If we were to close the loopholes that we know exist for wealthy investors, would this have any impact on local governments and the role that in this partnership of development facilities and stadiums.

I I'm sure that it would because in effect they would be would have to borrow at the market rate rather than the tax exempt rate. It could be ameliorated by instead as I mentioned um in to the previous questioner if Congress were to enact the same dollar value of subsidy but to do it directly rather than indirectly through the exemption, in which case it would make the local government whole and it would also save um the inefficiency, the wasted amount of money from the federal treasury that doesn't end up in the hands of the beneficiary.

Thank you very much. Thank you, Mr. Chairman, and I yield back.

Mr. LaHood.

Thank you, Mr. Chairman, and appreciate you having this hearing today, and I want to thank our witnesses. for uh your valuable testimony here today on this important topic. I represent the state of Illinois and as has been alluded to, we're having a debate in the state right now regarding the Chicago Bears and whether the Bears should be playing their home games in the future in Hammond, Indiana or in Illinois. And I frankly think it'll be political malpractice if we allow the Bears to go to Hammond, Indiana. Um and but that debate is on full display in the state of Illinois right now, and there are obviously political and economic risks moving forward on what direction uh we decide to go on this. And, Mister Coats, I know you've spent a lot of time on stadiums, um from a taxpayer perspective, what should be top of mind for taxpayers as we look at this debate between Indiana and Chicago?

wanna distinguish between the federal taxpayer and the taxpayers of Illinois and Indiana. So the federal taxpayer in general um is putting some of the bill for whatever subsidy wherever they go, wherever the bears end up. And so my first sort of question would be, is there any particular reason that somebody from Mobile, Alabama should pay for the stadium in Chicago or Hampton, Illinois? My gut says nobody in here would think that that's the appropriate thing. Now let's think about the taxpayers in Illinois and Indiana. If the taxpayers in Indiana want, and I think it's not clear that they do, but their politicians and certain advocates clearly do, then they should be perfectly allowed to subsidize the move of the bears and bid for them. Similarly for taxpayers in Chicago. Now I said that I don't think that they do, and the reason I don't think that they do is that referendums frequently have not passed when they've been put to the people. And so what has happened over roughly the last twenty to twenty-five years is that city governments and state governments have said essentially, yeah, we can't trust the voters to subsidize the team, So let's do it ourselves. And so, my f- my reaction would be, let's ask Chicago. Let's ask the people of Il- in Indiana, if this is what they want their tax dollars going for. Now, when I say that, I also say, let's tell them the truth. Let's not have an economic impact report produced by the bears to say what the value of the bears is to Chicago. have an independent analysis done that will look at not just what goes on with a subsidy to the bears but would look at using that same money for a variety of other purposes and then decide based on that which is the best return for the city. That's the way these things should be done, instead of whoever is the loudest voice with the greatest self-interest touting a value that frankly is just nonsense. No independent researcher ever believes the results that come from an economic impact report produced by a stadium proponent. They're just silly. And so I would say do a real analysis, independent of the people who have a stake in the outcome, and provide that information to the voters and let the voters decide.

Um, uh, mister coach, you've spent a lot of time in research on stadium financing, and

Most of the people who would say that those that benefit the community, um, would say that the the facilities are embedded within the community, as opposed to, um, what was the norm in the past of a large facility out in the suburbs surrounded by a sea of parking lots. So put it downtown so that it take um what's it called now, the the the capitals not capitals, cap one arena, whatever it's called these days, um take that as an example. The claim is that putting it there benefited the city because of the bars and restaurants and other activity around it. If there is a case, that is probably the best case. Now, I would argue that's not a good case, because anybody who's spending money in a bar or a restaurant on, I think it's sixth Avenue, is not spending that money in a bar or restaurant in Georgetown. All you've done is move money around, and that's just pure redistribution of activity within the metropolitan area. I don't see that as a as necessarily a good thing. If somebody wants to without a case that that redistribution from this neighborhood to that neighborhood somehow makes us all better off I'm willing to listen to it. But they typically don't.

Thank you.

I yield back.

Mister Estes.

Thank you, Mister Chairman, and and thank you to our witnesses for being here today to to provide your expertise on the future of tax policy as it relates to sports. You know, the the federal tax code uh should not be used to pick winners and losers by or local government over another using tax exempt bonds for business relocation. I've been a long time skeptic uh against uh the star bonds programs in Kansas and, and sometimes they work, sometimes they don't, and but the federal taxpayers shouldn't be on the hook supporting those types of tax advantage bonds. But that's the current rules we live under. If we need to change the rules then that's what the committee should do, and that's one of the reasons why we're having the hearing today. Uh, for me personally, it's disappointing that the Kansas City Chiefs are gonna be leaving Arrowhead You know, I've enjoyed many tailgates and games at the at the loudest stadium on the planet. Uh, but I'm glad the leaders of my home state fought to keep the Chiefs in Chiefs' kingdom. Kansas City Chiefs uh will uh and their fans will continue uh, whether you live in Garden City, Kansas, or whether you live in Cape Girardeau, Missouri, will still be able to uh continue to support and enjoy watching the Chiefs' games. While this particular deal was may not be perfect, it does require the Chiefs to have skin in the game, that will keep them in the Kansas, Missouri market for years to come. Uh, beyond professional sports, uh, committee needs to take a much deeper look at the tax implication of the name, image and likeness deals, uh, that have been become a permanent fixture in colleg collegiate sports. NIL activity reached an estimated two point three billion dollars in recent years, and broader college sports market size is expected to grow to a staggering forty-seven billion dollars. It's not small scale, it's a massive, uh, micro-economy. And for many of these student athletes, as mentioned before, the income, products, and benefits they receive through NIDAL is marked the first time these young men and women interact with the US tax code. Uh, without clear accessible guidelines and rules from the IRS, many of these athletes are struggling to get their filings done correctly. Uh, they're often blindsided, as mentioned, by self-employment taxes, non-cash compensation like free cars or gear that counts as taxable income and multi-state filing requirements. Um, these athletes aren't corporate executives with teams of accountants that can handle those requirements they're trying to balance full-time class load grueling pact- practice schedules and suddenly complex paperwork uh additionally we need to ensure that NIL deals do not unfairly advantage certain taxpayers over others I'm glad the IRS has drawn clear lines to recognizing that uh third-party NIL collectives do not meet to requirements to be tax exempt uh more discussion and clarity is needed to ensure that other NIL donations and revenue sharing agreements uh with universities directly or treated similarly. Let's take this hearing opportunity, kinda look at how we can make it easier for student athletes. Uh, Mister Ocho, uh a a st- a uh a student athlete who plays in fifteen states and may end up owing taxes and filing returns in most of them, it gets a lot worse if the school's not withholding uh estimated tax payments. How can we as Congress uh make it easier and simplifier for athletes to file in those different jurisdictions?

Thank you, Mister Estes. One idea is the idea of having just a flat tax rate, simp- similar to corporate corporations. There's a flat twenty-one percent tax rate. I understand the graduated rate that we have for people who are making more money or less, but that's one idea. Another idea is potentially to uh exempt some of these players from filing taxes in all these different states in which they play. So the state tax may not be there, but the federal tax at least will be paid. Um those are the only the only two options I see to try to help out a player outside having an entire team around him of CPAs to be able to file taxes for him or her, in all the different states that they play.

Yep. Well, I, I'm, I've been uh very interested in your comments around financial literacy, but that several of you have mentioned, but obviously um that's, that's an important part for anybody and uh one of the things that uh I have a strong interest in uh for years uh through that. So um you know, student athletes that are uh making similar amount of money or significant money, or ha- being told to set up companies or LLCs or S corps. I mean, that's typically what a business does, but it's new territory for a nineteen year old. Um, how are student athletes being advised and are they adequately being advised to manage these businesses?

Many student athletes are not adequately adequately being advised to manage these businesses. What you see is uh large companies, I use like JP Morgan, Jason as an example, they have these commercials with Tom Brady and Serena Williams and saying, we are the solution for athletes in this growing landscape of NIL. And athletes aren't realizing that they have nothing to do with taxes. And then on the second piece, taxes, while they are important, financial literacy matters as well. The - the biggest strength of these athletes is their youth, right? Compound interest works in their favor, them being young, nineteen and twenty year olds, and starting an individual, uh, an IRA or maybe a - a - a - a four O one K retirement plans. Like, those - the power of those over forty years, like, is a huge opportunity. And so athletes both need to think about the tax implication but also need to be uh saving for their future selves in the form of retirement accounts.

Yeah. Well, great. Well, thank you all for being here. Uh, I've got a lot more questions I could ask and talk about, but we appreciate your counsel for us in this. Mister Chairman, I'll yield back.

Thank you, Miss Sowell.

Thank you, Mister Chairman. I want to thank our witnesses. Uh, Professor Coates, before coming to Congress, I was a uh securities, corporate securities and public finance lawyer. And as a bond lawyer, I worked on lots of uh bond issuance in my home state of Alabama to help uh cities uh as well as historically black colleges um even the University of Alabama to do public projects, including stadiums. Uh and so I share your concern about how public finance and municipal bonds are being used to subsidize professional stadiums uh and their construction. In your testimony you stated that tax exempt financing for financial for professional uh sports fac- facilities is an inefficient subsidy because many of the benefits do not directly go back to the communities rather to the investors and the owners. Um how can we flip the switch? How can we make sure that communities benefi- that where these stadiums are located actually do benefit uh from um all the money that's being made?

Think the best way to make sure that the communities are benefiting is to make the I should be clear. If it's a professional stadium

That's what I'm talking about?

then the owners should pay for it.

Right.

And that would, whatever benefits are generated by having that facility in the community will redound to the community because they don't have to pay anything for the development that presumably will happen around it.

And when they leave, like in the case of my chairman's uh uh state, um the they wouldn't have to continue to be paying on something that they're not benefiting from.

Exactly, they wouldn't continue to pay.

Yeah.

If the if the stadium we're talking about was for the University of Alabama or

Which, I worked on several of those.

some other um public entity then I think that the case is much stronger for the use of the tax exemption. Precisely because we're providing

Exactly.

a public service to the community, something from which the community benefits,

Agreed.

whether it's and so this the exemptions were essentially developed to

Agreed.

enable local governments to provide state and local services that they might not otherwise do.

To incentivize. Absolutely.

And so

I wanted to also get on NIL, so I I wanted you to just say what you just said, which is that tax exempt financing has a purpose, That purpose, uh, is especially utilized when we're in the public space to allow for libraries to be built and to allow you know city uh city halls to be built and other public projects as well as um as well as private activity bonds which you you talked about.

That's a good one.

Um, Mister H. O., I wanted to talk a little bit about what you said. You said a lot of things that really resonated with me. My dad was a high school basketball coach in my hometown of Selma, Alabama at Selma High School for forty-two years. And he really poured into so many young men uh during that time and um I'm sad that he didn't live to see uh those players get compensated he was always one of those uh player one of those coaches that felt that um these young men uh were being um you know were were not being able to get the benefit of their full talent and others were leveraging that um and so my question to you though is and I also totally agree with you on the sentiment that what we advocates for them, not fans. And I consider myself to be one of those advocates. I have the great honor of representing the University of Alabama in Congress, as well as the SCC headquarters, um, in Birmingham. And, um, we're all knee-deep in trying to figure out how to put up guardrails around NIL. And I think too often the players get lost in this, that the, they are the talent. And look, I grew up, my dad believed in the student athlete, I believe in the student athlete. Um and af- the student part of it needs financial literacy. The athlete part of it needs advocates, as you said. And so what do you think is the long-term impact on young players by not having um, you know, advocates work on their behalf? We're talking a lot about the SCORE Act, and there's another bill over on the Senate side, and in lost in all all of this is that the universities benefit by getting um, you know, reduced liability. or no liability. Uh, and the players, yes they get to play, but they get to get money, but they don't get to get those, that money withheld, and so, so many of them, the the the example you gave an SCC player that had seven hundred and fifty, um, thousand dollars and at the end of it all had no money to pay his taxes, is a story that I'm hearing over and over again. What can we as a committee do? Um, I know you s- talked ab- about automatic withholding, I'm very interested in that. Uh, but I'm also very interested in making sure that, um, that when they get into the NFL, they also continue to be able to have financial literacy and and success. Your thoughts on that.

So I think that the, what I would love the committee to understand is that teams are not incentivized to educate and empower players.

Even college teams.

Even college teams, specifically college teams. they're not incentivized. Their incentive is to try to win games for the most part. And so someone on the outside needs to be that advocate. Misool, seems like you are one of those people that wants to be that advocate. People who have a jurisdiction over

Too many predatory, too many predatory folks are out there.

Correct. And it's not just the agents.

No.

It's sometimes the general managers of these teams.

Or the collectives.

Or the collectives. I have, I've had conversations with many general managers who are running, uh, who are helping running the, the, the, the, the teams, and they're saying, " Man, if I can get a player for half the price than he's worth, I'm happy with that."

Yeah.

And so it needs to be more people like you, people in seats like yours, that come in and step up for the players as opposed to people

Yeah, general ladies' time has expired.

who say they're getting millions of dollars let's forget about them.

Thank you, sir, and thank you so much, Mr. Chairman, for indulging me.

Yep. Excuse me. Just a reminder everybody, and I know this is good conversations, but please limit your remarks to five minutes. That includes asking, giving time for questions and answers. So, thank you next, I'll recognize the uh gentleman, Mister Smucker from Pennsylvania.

Thank you, Mr. Chairman. There was an earlier discussion about the Chiefs, and I want to say as a Pennsylvania resident and an Eagles fan, I don't much care whether they're located in Missouri or in Kansas, I'm just happy that we came back to dominate them in last year's uh Super Bowl.

Yes, yes, yes, yes.

Um, Doctor Coats, um, you've been talking, and I may ask um a few others this question as well, but you've been talking about um the tax exemption of bonds as it relates to building stadiums and i'd like to know whether you have an opinion as well on the tax exempt status the non-profit status of some of these large university sports programs and even of the of the collegiate conferences uh as well and this is i think um uh in the context of a broader conversation we've been having about our non-profit sector which obviously we extend non-profit status to um organizations that are providing a public good, and in return for that we give up um the taxes. But we've seen an explosion of non-profits over the past um few decades, and we've had some of the large hospital groups here, uh some of the huge public uh university endowments. Um, and the question is we really whether that's continues to be a fair um trade-off. And I'm just wondering if, um, you know, as we've seen the business of college athletics like dramatically grow in recent years, they're looking more and more like professional teams, which, um, in almo- I think in all cases, certainly in almost all cases, they are for-profit, um, companies, the - the, um, the leagues are as well. Should we be, um, looking at that, uh, relationship? Does it still make sense to allow uh some of the large college programs to be non-profits?

I struggle with this uh this exact issue um partially because it's related to the the question from um Miss Sewell I think that there are public purposes and most of the university I think serves those public purposes and the tax exemption is perfectly reasonable in that case. But the athletic department, it's not always clear what the public purpose is. And if that could be made clear, then I think the tax exemption would make sense. But to a as you've said, it looks more and more like they are for-profit entities. And if they are for-profit entities, then they should be subject to tax just like every other for-profit entity. and not receiving the tax exemptions. The, you know, as they say, the devil's in the details, and exactly identifying how an athletic department that is very much intertwined with the university is a for-profit entity and the rest of it is not.

It Yeah, I think it is a tough, it's a tough question, but I think it's a question that, that uh we need to ask. Uh, Mr. Raiola, any uh opinions on the topic? Mr. Mr. Madden, anything?

I haven't s- I haven't seen the books or records or tax returns of any universities, but I do know that uh s- some schools, some power conference schools are are looking into and some have actually initiated having their athletic departments form their own business entities. Uh, I think part of the reason for that is to bring in private equity to help fund them. Um, I also know from

Right. Thank you. Uh, Doctor Coats, would your comments essentially apply to a collegiate conference? as well i mean these are these are organizations that are not directly um providing uh the educational benefit um you know huge over a billion dollars in revenue um uh uh you know for uh for the big ten i think it was over a billion dollars for the sec as well um should they be uh non-profits

to the extent that the revenues that they collect, stay with the organization as opposed to get passed through to the universities? I think absolutely. To the extent that the revenue just, they act as a pass through to the universities that are part of the conference? Then I think not. Um I think that this private entity aspect that um was suggested, there is some evidence that that that exists. I think it's the University of Iowa their athletic department is one hundred percent separate from the rest of the university and maybe legislation that made that hold across would would resolve this issue.

Thank you.

All right, next a recognized uh gentleman from Oklahoma, Mister Hearn.

Thank you, Mister Chairman, um let's let's expand on this a little bit uh because if you look at something that's really the American people are demanding uh of committee and others and certainly their legislators uh in the federal government is transparency and you know the more that the universities delve into the NIL issue the more they uh as my friend here from Pennsylvania said they really start straining that relationship of being a tax exempt status uh something that the American taxpayers pay for in their individual states uh on their universities where they're getting other tax exempt areas, so they're sort of playing it with one foot in hot water, one foot in cold water, on average they should feel pretty good. But it's looking pretty obvious that as these get into businesses where uh, students are making, you know, upwards twenty million dollars NIL money, that um these are looking more like sports programs wrapped in some educational ideas in order to continue their tax exempt status. And, you know, Mister Madden, you you spoken earlier in your conversation, I I don't know if it was right in your opening statement where you talked about standing the test of the twenty provisions to be uh a non-W two entity. Um having been in the business world for thirty-five years, um I I didn't know there were twenty, uh but I I I looked that up, there are a lot. I didn't know if you wanted to expand on that a little bit, because I think that really does start identifying some of the things that I'm talking about.

Yes, thanks for the question. Uh, Representative Hearn, um, the IRS has conducted employment tax examinations for decades, um, many times in the construction industry, um, where maybe drywallers or painters were working for one company and that company was telling them where to go, where to work, provi- providing all the tools of the trade, giving them their hours, but treating them as independent contractors. The IRS would come in and do a employment tax examination or audit and using those twenty common law factors that have sort of over the years been um uh um summarized into about three but mostly it's around responsibility and control and relationships um but de- reclassify those independent contractors as as employees and then charge the the employer with the applicable uh withholding tax usually it's one half of the uh social security and medicare tax on what should have been wages and not non-employee compensation. Many in the tax world, as I said in my opening statement, believe if the IRS were to go to a school, athletic department, um, and conduct an employment tax audit and use those factors, that the athletes would be reclassified as employees.

S- so might I ask this, uh, what's the what's the penalty for a company classifying somebody as a independent contractor versus an employee uh after an audit from the IRS.

Well number one it would be the additional tax and any applicable penalties and interest and then there's also the possibility for civil fraud penalties if it was deemed to be uh intentional and being done with knowledge uh that civil fraud could be assessed that that that's a much higher standard than just the additional tax that the NRIO has been providing.

So so it's safe to say the NRIO industry is still the wild wild west right now, and violating pretty much every uh established law on employer employee slash independent contractor. Uh, ev- every business in America would love to have an independent contractor status because it lessens the burden administratively on those businesses, just as it does universities. And the collectives um are a pass-through. Uh, some might argue they're laundering money uh from big donors directly to these students.

Mm.

And it just happens in my last minute that I have a uh former student athlete from my district, a very successful high school uh player. He and his brother both went to college and I always ask my interns to do a bill they'd like to work on, and last week he presented a bill to me in my office along with all my staff watching on this very topic. Because we're talking about it from a legislative issue, but if you're a student on the receiving end, as Mister Ocho said, this is a devastating experience in your life. And when you're a college athlete and you've seen this time and time again over a short period of time that we've seen NIL money has really become prevalent in sports it's devastating not only financially but personally and emotionally to those student players who came out of high school in fact his brother was the first NIL money earner in the state of Oklahoma just a few short years ago so this is something he's seen in his early career of his life going through college and seen others going to the pro world. Yeah, Mister Rocha, you didn't see when you were coming through college many years ago, and it's been devastating, not only financially but emotionally and tearing families apart for the very reasons you all testified. I appreciate you all being here, sharing your expert testimony. Mister Chairman, I yield back.

General Lady from California, Miss Chu, is now recognized. Five minutes.

First, I want to acknowledge that sports can play an incredibly important role in our communities. My district is home to the Rose Bowl, one of the most iconic venues in the country. After the Eaton fire devastated Altadena and Pasadena, the Rose Bowl stepped up to support, relief and recovery efforts, serving as an emergency response hub for our community during one of its darkest moments. That is the very best of what sports can represent. Which is why I find today's hearing so baffling. At a moment when families across this country are struggling to afford health care, housing, groceries, and child care, while communities like mine are still rebuilding after devastating natural disasters, I cannot understand why the majority has decided that the tax treatment of the multi-billion dollar sports industry deserves this committee's attention today. The Ways and Means Committee has jurisdiction over some of the most urgent economic challenges facing the American people. We could be examining why health care costs continue to rise. We could be addressing the millions of Americans losing affordable health coverage after Republicans allowed the enhanced Affordable Care Act premium tax credits to expire. We could be discussing how to help working families keep more money in their pockets or how to support communities recovering from disaster. Frankly, this hearing is a slap in the face to the millions of Americans looking to Congress to take their challenges seriously and deliver real solutions. And unfortunately, it isn't surprising. Just one year ago, this committee spent nearly eighteen hours marking up one of the most regressive pieces of legislation in modern American history, the Big Ugly Bill. Throughout the night, Democrats fought to make the bill less harmful to working families. We offered amendment after amendment to protect health care, make the tax code fair, and ensure that the wealthiest Americans paid their fair share. Republicans blocked every single one, including my amendment, to stop people making more than ten million dollars a year from receiving another tax cut. That night, Republicans made their priorities unmistakably clear. Protect tax breaks for the wealthiest Americans while forcing working families to pay the price. Next year, households making less than fifteen thousand dollars will see their taxes spike by over nine percent. And those making over one million dollars yearly will see their taxes decrease by almost one hundred thousand dollars. And all of this was paid for by kicking over fifteen million people off their health care the biggest cut to health care in our country's history. And that's not even counting the damage caused by Republicans' decision to let the enhanced af- affordable care act premium tax credits expire, driving up health insurance premiums for millions of Americans and pricing many families out of coverage altogether. That includes over sixty-one thousand of my constituents, like Laura from Pasadena, whose premium is skyrocketing from fifty-six dollars to five hundred and fifty-two dollars. That's an eight hundred and eighty-six percent increase. She isn't asking Congress to debate tax policies for professional sports. She's asking how she's supposed to afford health care insurance. And now Trump is refusing to sign one of the most significant pieces of bipartisan housing legislation in decades. that will make it easier for working families to buy a home and achieve the American dream. It shouldn't be a surprise, considering he himself said that he doesn't care about American's financial situation. While families are struggling to afford health care, housing, groceries, and child care, this committee shouldn't be spending its time debating the tax treatment of one of the wealthiest industries in America. We should be focused on lowering costs, and improving people's lives. I yield back.

Jenna Leidy from West Virginia, Miss Miller is now recognized to speak on the hearings topic.

Thank you, Mister Chairman, and thank you all for being here today. The older I get, the more generational I become. I can remember my grandmother talking about my grandfather a good Catholic boy, John Francis Devine from Chicago, who talked Newt Rockne into going to Notre Dame with him. He played football. My grandfather held the world record in the eight eighty. My father was also a student athlete, and he ran track with Jesse Owens at Ohio State, and he said, " All I ever saw was his back." I mean, it, the opportunities that these young men at that that they could actually get an education while using their talent was very special. I mean, what we've become today, um, it it's just grown and evolved, the, you know, the professional teams, the student athletes, the universities, and and it just becomes more and more complex. And I understand why we're talking about taxes, and I'm, you know, I'm hearing about these young people who just thought it was free money and they didn't understand, yes, I want to put my mom in a nice house and yes, it'd be really nice to have a car. Um, it just the growth in name and image and likeness opportunities that the universities are creating for these new companies, to accept outside money, it's important for all of us to really understand where that money is coming from. Sovereign wealth funds and government money from places like Saudi Arabia? have been pouring into sports worldwide and these groups are now circling college sports next. Mister Madden, if a golf sovereign fund takes a stake in a school's new athletic company, or bankrupt, bankrolls an NIL operation, could it be earning returns on American college sports essentially tax-free? And is this better tax treatment than an American investor might be getting who who's putting in the same dollar would get?

Thanks for the question, Representative Miller. I'm not familiar with um money like that pouring into college athletics, um and I'm not sure what the tax treatment would be. I do know the PIF, the uh the investment fund that funded things like uh live golf um, you know, really changed the landscape of of the of professional golf, the PGA Tour, but I'm not familiar and I don't feel qualified to comment on what what the tax advantages or disadvantages of that would be.

Thank you very much. I I'll turn to Doctor Coats. How has the cost of building new stadiums changed over time, and and what is really driving this change, and if you can get into any of the bankrolling or the things you know about, please share it with us.

The the change over time is very real. It arises essentially from two things. One is the obvious increase in the cost of materials,

Sure.

and the other is what I'll call the Taj Mahal effect. Basically we want it to be the most grand, you know, elaborate facility possible with as many possible ways of extracting revenue from the fans. So, high-end eateries, video game arcades, steaks, uh, s- steak restaurants, whatever you might imagine going inside the stadium is there in order to extract revenue from fans and that builds up the cost.

But m- Our aspect is who's paying taxes on this? How you know w- Money in, money out. How does this work? You're the economist.

It the the payment for this is basically two-fold. There is the private sector does pay some of it, and the public sector pays some of it in the form of state and local government bonds, typically, which are then financed with increases in sales taxes, lottery revenues, um, sin taxes, a variety of other methods to generate the funds to pay the bonds.

Extract. But what if I mentioned Saudi Arabia, but what if another country's investing in there, do they get advantages? not be be taxed the same way?

I'm not a tax accountant or a tax lawyer.

Okay.

So what I would say is the investment that Saudi Arabia or anybody might do is to become a partial owner and then as far as I understand they would be subject to the same sort of tax uh liability as any other owner of a s a sports franchise.

Okay. Thank you so much. I yield back.

Recognized myself for - for five minutes. Uh, I was at the, uh, College World Series the other day and Mister Hearn from Oklahoma is not here. Congratulations to him. His team cheated, but that's a whole different thing. Um, uh, you know, it was interesting talking with the athletic directors there about the NCAA and all that's turned into NIL. I think they'd rushed into this and to your point, Mister Achoo, I think they rushed into it without thinking two steps ahead, three steps ahead, four steps ahead. So many of these kids come from impoverished homes that are not used to paying taxes, and then all of a sudden they get out of the blue, the boogeyman comes, they don't know, understand they also have to pay their agent, or twenty percent, and then the hanger's on, et cetera, et cetera. There's so much financial literacy that does not happen in so many places. And then to have so much money dumped on them, it's great for them, but um, doesn't usually last very long. So, real quick question, Mister, uh, if, if, uh, a sp- uh, athlete goes to California, professional athlete goes to California, and has to pay California taxes for the day, do they then get forgiven those taxes? back in New York or somewhere?

They get a credit in their resident state for the taxes paid to California.

When did all this, when did all this start?

Interesting that you uh ar- raised that question. The myth is, back in the early nineties when the Bulls were playing the Lakers, the Bulls' l- l- uh Chicago legislature got wind of the fact that the um California was taxing, the franchise tax was was taxing professional athletes. So they built in the same kind of law. And it's it's you all over the place. But the problem if you pay tax to California is they have the highest tax rate so you can't get a full credit in the state you're resident.

Yeah. Yeah. Seems uh like you're running around with a bunch of, you know, it makes just an a- a crazy thing for your tax burden at the end of the year, or you're just paying tax attorneys and accountants. Um, you know, I I think just talk I think this is actually a fascinating topic because there's so many permutations that we can talk about. You know, when we think about nonprofits, people usually normally think about the United Way, the Red Cross, the Girls' Club, uh, the Boys and Girls Club. They don't think about the NHL. They don't think about the, uh, PGA. And, you know, nonprofit status now has just exploded in this country and, um, for some good reasons but for some other ones that we're an- now pointing out to. Um, the fact that professional sports franchises are non- for - are for non- for our for-profit entities while sports leagues may qualify for tax exemption status under current rules, begs the question, so the justification for the tax exempt status is that leagues operate as, quote, business leagues that serve as exempt purposes association of persons having some common business interest. So, professional sports leagues are beginning to follow a trend of voluntarily giving up their tax exempt status, which is a good thing, I think. Major League Baseball did it two thousand seven, NFL did it in twenty fifteen. But the NHL, the PGA, and the LPGA still retain their tax exempt status. So, Mr. Madden, should this committee think about removing the tax exempt status for these professional sports leagues, the ones that are outliers?

I'd have to look at every individual situation to make an informed uh opinion on that. Um, uh, Representative Murphy, um, I know the PGA tour is in the middle of uh a total restructuring that they announced last week. Um, I didn't read anything about them giving up their tax exempt status, but I certainly s- think it's something that this committee certainly has the jurisdiction and the authority to consider.

Yeah. You know, if you have other professional sports doing it, um, you know, it's not gonna be a huge thing, it's not gonna take us out of debt, but I think given the fact that they received so much, um, so much of an exemption, I think it's a reasonable thing.

And I, I do know that the PGA Tour, uh, donates an incredible amount of money to charity, um, through their tournaments that are held throughout the country.

Sure.

Um, probably, I'm not certain, but it seems like it's more at least in proportion to some other of the other sports leagues that you mentioned.

And that's a wonderful thing. That's uh, you know, the the top one percent gives a a true a a crazy amount of money to charities, which are not seen as taxable events, but um, it's great that they do that, but also they should also play along the rules with uh with everyone else. You know, I think this begs the question is what's fair, what's not fair, what are other people doing not Um, and I think that the professional world, just like the quote amateur world, I, I don't know that the term, Mister Achoo, is a professional, I mean student athlete is really much of a fair term anymore. Um, I've seen athletes now, five teams, five years. Um, they don't get an education. They walk out and, um, they may have a little bit of money left. They don't have an education and they sure don't have a loyal alumni following. Um, but that's a whole different thing because, you know, if you're a scrub on a team and you stay on it for

Well, thank you. Um, uh, uh, I'm, I'm, first of all, first of all, very appreciative that, very appreciative that, uh, uh, this hearing is being held. this hearing is being held. Frankly, I think it's a topic Frankly, I think it's topic that's long overdue. And it seems to me, listening, uh, to this really great conversation and great witnesses over the last two plus hours, we have two different but related issues that we've been talking about. First are all the issues related to college sports. There have been more changes, uh, in college sports, specifically with money, in the last five years than the previous fifty and beyond. And that's because of a couple things. First, NIL. which came in uh was legalized by unanimous decision of the Supreme Court about five years ago, almost exactly five years ago today. Then separately and parallel you had the house settlement, which of course now allows for direct payment of players from universities. Independent of those two major landmark things, you have court after court going after the ability of conferences in the NCAA to rule on certain matters, most recently the absurd Brendan Sorsby situation. I'm sorry to see a fellow Brendan who brought the name in disrepute, but the idea that you would have, I mean maybe it should be called the Pete Rose rule, the idea that you would have an athlete still be allowed to play a sport even though he bet on games in that sport, including games of his own team, absolutely absurd. So because of everything I just mentioned, you have various efforts going on here on the Hill to attempt to tackle all of this. There's been uh legislation, the SCORE Act was was mentioned as one, there's other House legislation. Independently you have the effort being led in the Senate by Senators Cantwell, Cruz and Coons, which passed out a committee just a couple weeks ago. But then it seems like we've also been having kind of a separate conversation specific to st- sports stadiums and financing. Uh, we have one situation most recently in which the state of Missouri is now losing the Kansas City Chiefs, going over the river to Kansas, and you have a very wealthy sports owner, a family worth billions of dollars, getting huge amount of taxpayer subsidies from the state of Kansas. You might, uh, be seeing that situation repeated, with respect to the State of Illinois and Hammond, um, Indiana. So I want to address, uh, both of these matters, and let me start with the latter first. Um, I am very concerned that we have a system today which is essentially a race to the bottom, in which you have municipalities and states that are falling all over themselves to give billions of dollars of taxpayer subsidies in order to lure franchises away from one city to a city in their jurisdiction. If the state of Missouri thirty, forty years from now repeats what Kansas did, and state of Indiana does this to Illinois, and then a different state, maybe New Jersey does it to Philadelphia and to Pennsylvania, this is ultimately a race to the bottom in which in the end, it's all the taxpayers that lose. So I'm in the beginning stages right now of working on legislation at the federal level to dissent state uh disincentivize states and localities from engaging in this sort of practice. One of the things that we're looking at is the possibility of a federal excise tax. And so I wanted to open it up to the panel, maybe in particular to you, Doctor Coats. I'm open to any ideas and suggestions on how we can end this practice once and for all which ultimately it's the fans and the taxpayers who lose.

I would love to hear about your excise tax proposal, honestly, um, how exactly that would work. As I've, I've said before, I think that the best way to do it is, or the, the way I would recommend doing it is first to get rid of the tax exemption, for state and local government bonds used to finance stadiums. The second thing I would do is restrict the ability of the leagues to be monopolies. And the way that you might do that, I think, is have strong um supervision by the Federal Trade Commission or others that res- that rein in their essentially extortionate kinds of demands that the, that clubs use to get stadiums and arena subsidies.

Well let me just, sorry, I reclaimed my time since I only have five seconds left and I don't wanna go over. I didn't have time to get to the second aspect of what I wanted to talk about in terms of state income tax and college athletes. Um, so let me just say again, I applaud the panel and I look forward to following up with, uh, at least one or several of you as Congress continues to get, attempt to get its arms around this multi-billion dollar challenge that we're facing in so many different facets. With that, I yield back.

The chair now now recognizes Mister Koshtoff from the great state of Tennessee for five minutes.

Thank you, Madam Chairwoman.

Yeah.

Yeah, thank you to the witnesses for appearing today. And Mister Rochelle, if I could with you, I I represent part of Memphis. And it's my understanding that the University of Memphis partners with Robin Hood uh money drills to offer a or credit for personal finance course that teaches student athletes things like budgeting, credit, and how to manage NIL income. Are you aware of any other schools or universities that are uh partnering with anybody to teach these skills to athletes?

Mr. Kastoff, I'm aware of a few schools that are partnering with organizations to try and teach financial education. and financial literacy, the University of Texas, the other UT, got a chance to bring in some people to do financial education for their school. But, uh, these opportunities are few and far between. It seems as if these universities are ill-equipped to bring in the right types of people to educate their athletes.

I'm asking this very naively. I don't know how many agents there are out there now for for college athletes. My impression is it's probably ballooned and mushed over these last few years. Yeah, you, I really appreciate your your testimony and you gave some real stories of real people and how how this has affected them from a tax standpoint. Do you think these agents should have any degree of training as it relates to tax so that they could educate and inform their their clients?

No, I don't, I do not think that agents should have the the burden or the degree of training. I do think that the athletes need some training in taxes. Uh, I heard from one of the gentlemen who was a witness saying that he had a chance to fill out a W-two as a high schooler. I went to one of the number one high schools in the country. I went to University of Texas, got my, you know, I was a business honors major. Went and got my MBA from the number one international business school in the world. At that time, the Thunderbird School of Global Management, now it's a part of Arizona State University. It was voted top twenty smartest athletes in all of sports. There was never a class that I had about taxes. And I think that's the biggest issue. No one's teaching or having conversations. I don't think it should be the agent. Um, it should be someone helping the players understand those taxes.

Thank you very much. Doctor Coates, you were asked earlier by uh, Mister Smucker, maybe Mister Murphy, Mister Smucker for sure, about the college conferences and their tax exempt status. I can maybe focus on the on the top four that the top four that generate the most revenue. Your opinion, do they serve a public purpose or are they a commercial entertainment business?

As a cop-out, I'm gonna say they're both, uh because certainly the organization of the league, the setting of the schedules, the hiring of the the referees That's all absolutely necessary for putting on the league competitions, and and that is a public purpose, public service, I believe. The flip side of that is, as I s- uh said to the previous uh questioner, was what happens with the revenue? If the revenue is predominantly staying with the league and ending up as salary for the league administrators and so on, then it seems to me that that's a business, and if it's passed on instead to all of the the schools, with just bare cost being retained by the league, then I think that it's really a public purpose entity and that the tax exemption is reasonable.

Thank you, Dr. Coats. Mister Mister Royale, uh, if I could, I'll ask you the same question. I You look at these conferences, some of them have the major game of the week. It's uh it's big viewing. They get big revenue from the networks and the streaming services. Are these conferences Are they a pub do they serve a public purpose or are they a commercial entertainment business?

Um I would say it's if you really look into it it's probably a commercial entertainment business. They are earning a big amount of money and as their players play in other states, uh they're subject to the jock tax, which is non-residents who are playing in other states. It doesn't r- it it although it applies to executives, it's not really enforced. Athletes are, or student athletes, high profile, high salary, and easy to track where they've been. So, the uh state tax is also an issue, but that's how I answer that question.

Thank you very much. My time has expired. I'll yield back.

The chair now recognizes Mister Stuebe from the great state of Florida.

Thank you, Madam Chairman. Um, thank you for the witnesses for being here today. I wanna focus on an issue that directly affects my district in Southwest Florida. The Atlanta Braves hold spring training at Cool Today Park in Northport, which is in Florida's seventeenth congressional district. For my constituents, it's not just a baseball facility. It's a major part of our local economy. It brings families and visitors to Northport, fills restaurants and hotels, supports local jobs, and has helped drive continued investment in the surrounding community. Over the last five years, the Braves have invested roughly ninety-three million in the Sarasota Northport market. including their portion of construction costs associated with the ballpark, the surrounding complex, and their academy. During that same period they've contributed approximately seven hundred fifty thousand uh to local organizations and community efforts including field refurbishments, disaster relief, which has been hu- huge during hurricanes, youth baseball organizations, public safety, the Boys and Girls Club, and other nonprofits across the area. So when we talk about federal tax policy in sports, this is not an abstract issue for my district. It affects real communities, real jobs, real small businesses, and real local investment. One area I'm particularly concerned about is section one sixty-two M provisions from the Democrat-passed American Rescue Plan Act of twenty twenty one. That provision was originally written decades ago to limit deductions for certain executive compensation at publicly held corporations. The policy concern was corporate executives who have influence over the company, and in some cases influence over their own compensation. But professional athletes are not corporate executives. They're not sitting in the boardroom. They're not managing the company. They're not setting corporate strategy or deciding their own pay. Their compensation is determined in the competitive labor market, governed by contracts, leagues, and collective bargaining. Yet because the Braves are publicly held, this provision treats the Braves differently than every other Major League Baseball team in the United States. The same player salary that would be deductible for a privately held MLB team is limited for the Braves. not because the Braves operate differently on the field and not because their players are executives, but because of the ownership structure of the team. That strikes me as exactly the kind of unintended consequences Congress should take seriously, and the upcoming expansion to even more employees will create an even larger disadvantage. This is not about whether a team should pay taxes. Every business should pay what it owes under the law, but the tax code should not arbitrarily single out one team in one league and put communities like Northport and Sarasota County, at a competitive disadvantage. If a federal tax rule affects a team's ability to invest in players, facilities, jobs, and the surrounding community, then this committee should understand that impact and determine whether the law is working as Congress intended. Uh, Mr. Raiola, my district is home to the Brave Spring training facility in Northport. When a professional sports team supports local jobs, tourism, and surrounding small businesses, should Congress at least be cautious before allowing an unintended tax change Does it disadvantage that team relative to its competitors?

Yes, I believe I believe that would be true. The uh there are a number a small number of teams that are publicly held like the Rangers, and then next are held by MSG, and um the Braves as well is publicly held. I think um it it seems unfair to just tax the publicly held companies and not the other companies they could raise a lot more money if they went after privately held businesses and did that as well. But to your point, it does make a big difference and it's unfair competitive advantage to certain cities where you're uh where you work at and represent.

If a team faces a new limitation on deducting ordinary player compensation, could that affect decisions around payroll, facility investment, staffing, and other community-facing operations?

Most definitely.

I'll just change gears to the NIL for a second, uh, Mr. Accio. Um, earlier today I introduced the Hustle Act with my colleagues on this committee, Mr. Boyle. This bill would create NIL investment accounts for student athletes that would exclude contributions from taxable income and grow their earnings tax-free. Up to th- up to thirty-five thousand could be rolled over into an IRA after graduation. How else can Congress incentivize student athletes to save their NIL earnings while accounting for the unique investment and tax liability challenges that athletes face.

Mister Stuebe, thank you for sharing. I have not heard about that bill, but it sounds very interesting. It sounds like the type exact type of thing that a young athlete needs. The biggest strength that an athlete has is their time. And so in teaching them how to invest early at a young age is exactly what an athlete needs so maybe I would argue maybe more provisions maybe a a higher limit, rather than thirty five thousand maybe increase in that limit, maybe to seventy two thousand like you see in it uh you know the the four O one K, some of the four O one K opportunities, individual four O one Ks.

Well my time's expired but I'd love to work with you on that and I'm sure Mister Boyle would love to l- work with you on that as well. Thank you guys for being here.

Thank you.

I yield back.

The Chair the Chair now recognizes Mister Byer with the great state of Virginia for five minutes.

Ma- Ma- Madam Chair, thank you very much, and Ranking Member Horsford, um Forgive some of my redundancy, but I was a kid in Washington DC when the Washington senators moved from Washington to Minnesota. We had an expansion team and ten years later they moved to Arlington, Texas. I still remember March twenty ninth, nineteen eighty four when Robert Herve moved the Washington the Baltimore Colts in the middle of the night um to Indianapolis. The number one bumper sticker in Baltimore for the next ten years was expletive deleted of Robert Herve. Um So it's over the past fifty years, through the misuse of tax advantage government bonds, ordinary taxpayers have been on the hook for billions of dollars in construction costs for privately owned and operated stadiums. We just had this fight in Alexandria, Virginia a year or two ago on moving an arena to Alexandria that uh was with the same problem. Many of these stadiums are owned largely or in part by some of the richest people in the world, and these billionaire owners continue to take advantage of our tax and political system, to shift the cost of their new arenas onto working and middle class Americans, while they take in more profits. They pit cities and states against one another, as we've talked about, threatening to pick up and move their franchises if they don't receive sufficient public financing to cover the cost of their brand new structures. Their arguments to stadiums boost jobs, creation and economic development have been discredited over and over again. One of our witnesses, Doctor Coats, writes that there's little evidence the stadium is built for professional sports franchises, result in measurable increases in incomes, tax revenues, or um in employment in the cities that built them. And any benefits that do exist are usually found within a mile or two of the facility. With that in mind and in a time where there's a debate over whether the country can afford investments in child care or health care, education, or fighting climate change, it's ridiculous to even contemplate the continued radical misuse of publicly subsidized bonds. It's a long past time to fix this egregious practice. It was indefensible fifty years ago. It's even more so now. Uh, I lead a bipartisan and bicameral legislation that ends the taxpayer subsidies for the construction professional stadiums with Congressman Grothman, Senators Langford and Booker. Doctor Coats, obviously you're one of the leading experts on this issue, and this legislation we have is certainly not the first attempt to eliminate this practice. Can you explain how the tax, the authors of the Tax Reform Act of nineteen eighty-six tried to use end the use of tax exempt municipal bonds and how do local governments and team owners find a way to work around it?

Thank you for the question. Um, the basic way that that they attempted to get rid of this was by limiting the amount of money that could be used from the entity, say the stadium, to pay off the bonds. And it had been twenty-five percent prior to the Tax Reform Act of eighty-six, And they moved it down to ten percent. And they thought that by doing so, it would be harder for, um, the revenues to be used in such a way as to be a taxable bond. What they failed to recognize, and Senator Moynihan, when he proposed legislation in nineteen ninety-six, admitted that they didn't ever imagine that what would happen is, instead of cutting back on this, they would just find ways to pay the bonds off without using any revenue from the stadium. And so essentially what you have is the law of unintended consequences, we do one good thing and smart people figure out how to undo it to their advantage. So the bottom line was to fund the stadiums through these tax exempt bonds, they came up with alternative schemes, things like using lottery revenues, using um hotel and rental car taxes, using taxes on tobacco and alcohol, and a variety of other schemes, including something called a pilot payment in lieu of taxes, in order to come up with the revenues to pay off these bonds.

I think in Virginia they were gonna use the the uh income tax revenues of the players uh to pay for the bonds, for example. You know, uh Congressman Stubbe talked with pride about the things the Braves had brought. Um, hard to argue against, but K- Dr. Coates, looking past that, Quito was the better idea at the cost of the citizens, beyond just being able to put the names on the Little League jerseys.

I'm sorry, I didn't quite catch the question.

Um, but what Y- your research has shown that there's little connection between the presence of a new stadium, and economic growth. You could you just expand on that, well,

Oh, sure.

in your seven seconds, or

Basically, it's all redistribution. So, any money that you spend in the stadium is money you're not spending someplace else in the community. And so there's not a net increase in spending. There's just a sw- a swapping of one place for another.

Th- thank you very much. Now you're back.

Thank you very much. The chair now recognizes Mr. Moore from the great state of Utah.

Thank you, chairwoman. Appreciate your witnesses for being here. Uh, very important discussion we're having. Um, college sports as we know are woven into American campus life. local communities, family traditions. But letting foreign entities funnel money and sponsorships into college athletics risks undermining the integrity of the game and exposing universities to unintended foreign influence or national security concerns. This is why I've introduced the No Foreign NIL Funds Act, which bans most foreign contributions to NIL agreements and prohibits certain high-risk countries from making investments into collegiate athletics revenue streams, sponsorships, and official events such as tournaments or bowl games. I'm sure you've all studied this legislation at depth, right, that's, we put it out a little while ago and so I kn- I know you're very up to speed on it. But, Mister Madden and Mister Alioa, set the dollars aside for a second. When a foreign government linked entity is funneling money to college athletic programs, what is actu- what is it actually buying? Is this about a return on investment or is it about access, influence, and a foothold inside these institutions that sit at the center of American community life? Mister Madden.

Rep- right, representative Moore, I'm unfamiliar with the legislation, but I'll be certain to uh review it. Um, I can't comment. Uh, it's not my area of expertise. Um, um, I I just think the schools, from my experience in talking to administrators and visiting universities, they're desperate to find new revenue streams. Um, it's the race to the bottom, you know. Um, the University of Louisville is on record as saying, um, this is totally unsustainable, that their reserve funds have almost been depleted in trying to keep up. So, I see it as the university is just looking for those different revenue streams, whether it be patches on uniforms, naming rights of stadiums, naming rights of fields, looking for uh bringing private equity in uh to continue to fund. As many athletic directors have testified here in Congress, um it's you know the twenty-one million in rev share, it's not like that was just sitting there ready to be handed out. They need to find it somewhere. So I think that's where it's coming from, but I'm sorry that I can't use the important expert.

Thank you. No, absolutely. Y- y- you're highlighting the actual issue. They're they're gonna get so desperate. They're gonna make they're gonna be willing to make big bets. Hey, if we just

Yes.

you know, spend a little bit more on this then we're gonna be able to overcome these deficits that we're now seeing, colleges across the country, and then foreign money all of a sudden becomes an easy option, and then what happens there? Mister Ayala, any thoughts on the foreign aspect?

would be that as these non-resident aliens are not as much

Would you mind turning your um, mic on?

Little closer.

Thank you.

As, as these non-resident aliens come into the US, they are subject to income tax. So if you have a kid coming from Denmark, he spent some time in the US, he's paying federal and state taxes. As far as the colleges are concerned, they're they seem to be grabbing, like the gentleman just said, they seem to be grabbing whatever revenue they can, and they're in tough straits to try to raise as much revenue so that they compete with each team. A l- a lot of uh there's of several states that have decided to not tax NIL income as a way to gain an advantage. So, uh, that is another way that it aspect that we that should be considered.

Awesome, thank you. So, I mean, we already accept certain aspects of of foreign influence and foreign investment are not not not not not good or healthy defense infrastructure, farmland, things like that. At what point do American universities become part of that? So it's a it's an important question to ask uh the No Foreign NIL Funds Act part of that, it's been part of the discussions that we've been working on as far as legislation to correct some of these these these um these wrongs that have, that have taken place over the years. Mr. Achu, I just wanna finish up. Uh, your testimony was awesome. Uh, hearing your perspective, you trying to be a mentor to some younger athletes, uh, it was really inspiring. And the examples that you gave, they're s- it's so easy to come by. Like, oh, the good influx of fifty thousand, a hundred thousand. five hundred thousand dollars, they're not thinking that they're gonna have to pay taxes on it, it's um, it's well, they're also not thinking about their future. They're thinking about the here and now too often, as as as you mentioned. In the in the um in last year's tax legislation, we created the Investment Amer- the Invest America initiative created individual investment accounts for every child born in the next four years, but every kid, it's every every teenager up to eighteen can start these. So, this is the beauty of it. They're gonna get an NIL m- money from from their playing days. And they're gonna have to have an avenue to put it into. Every kid in America under the age of eighteen should now be able to have these accounts, as of July fourth this year. And then it's an easy option. They just put the money right there. It's already built into their account. They have an app for it. It's very simple. Hopefully they get it when they're seven years old or twelve years old. And then when they go get that opportunity to play college b- college football, they can all of a sudden say, " Hey, I'm gonna put five thousand dollars in this year." And they've got it already built in and it's already going. That's the beauty of that. I would welcome any partnership to work in and educate people on that. Thank you for the work you're doing. I yield back.

Thank you very much. The chair now recognizes Miss Tinney from the great state of New York for five minutes.

Thank you, Madam Chair. And I think you're uh, just to reiterate for uh the our viewing audience um, the title of this hearing is important. It's the growing business of sports reviewing federal tax policy in this multi-billion dollar industry, growing every day. And uh, I just Want to thank the witnesses for being here, for your expertise, your excellent testimony today, and and and re- representing a very diverse set of of viewpoints across a lot of different sports. And I want to bring up an issue of great importance, uh, which the President has talked about as recently as this week, that is protecting women's access to sports. Um, nobody questions why women don't play in the National Football League. We all understand that there are real physical differences between men and women that matter in athletic competition. that are aren't social constructs, they're actually biology. And that's precisely why we created separate categories for women's sports in the first place not as an afterthought but as recognition that without it, women could be locked out of the same athletic opportunities as men. That's the entire premise behind Title Nine, which was not very active when I was a young person, uh, playing sports. Uh, for over fifty years Title Nine has guaranteed women and girls access to athletic opportunities, scholarships, roster spots, podium finishes, that simply just would not exist if they were forced to compete head-to-head against biological men. If biological males are allowed to compete in women's sports, we are not expanding opportunity. We are taking it away from the very uh women Title IX was designed to protect. This principle was upheld in a Supreme Court decision announced just hours ago. Uh Justice Brett Kavanaugh wrote, and I quote, " consistent with Title IX and the equal protection clause, We hold that the States may maintain girls' and and women's and girls' sports for biological females. They may determine eligibility for women's and girls' sports based on biological sex. The Constitution and Title IX do not require an overhaul of women's and girls' sports throughout America. While this decision is monumental, is a monumental step to protect women's sports, Congress can't take its eye off the ball. That's why I introduced the No Good Will for Harming Women Act, Right now, when one purchase purchases a professional sports franchise, section one ninety-seven of the Internal Revenue Code allows them to claim valuable deductions tied to goodwill the brand value the broadcast rights the intangible worth of the franchise all these things you've been talking about today. My bill simply says if a professional women's sports franchise chooses to let biological males compete against women American taxpayers should not be subsidizing that decision through the tax code. And I'm not gonna ask you guys any questions on that at this point. But I do wanna talk to you a little bit uh about executive compensation, and you've done a great job talking about this today. Um, and that is uh I I think Mister uh uh Ray Ohler uh did this, I I answered this and I wanna ans- ask you again, kind of in uh in reference to what Mister had asked you. Um, uh in publicly traded companies generally can't deduct the compensation above one million for their top executives and several of their highest paid employees. This role reaches into professional sports too, with several teams, including two prominent franchises in the state of New York where I'm from, uh being owned by public companies. So it applies to them in a way it doesn't for most franchises, and I think I'd like to see you address this again if you could, Mister Riola. Does this t- uh tax treatment effectively penalize these franchises relative to their privately owned competitors, And is that disadvantage significant enough to affect the parity of a league, of leagues long-term, if we see more franchises become publicly traded?

I think that the uh one ninety-seven tax definitely hurts the publicly traded companies and that own towards franchises. And since there's only about four or five of them, two of which are in New York, like you mentioned, the those t- those programs are definitely uh adversely affected by this. I am not sure why it's been if it has been considered, but if they're gonna disallow the deduction, why not expand that and expand that to teams, any franchise that's owned. So I I think it's a big disadvantage to the publicly traded companies, especially the ones in New York.

Yeah, thank you. I appreciate that, and I think that it it it, you know, we we obviously support our s- our teams. We love that the Bills are the only truly New York team,

Mr. Panetta. Mister Panetta. Thank you, Mister Chairman, gentlemen, thank you all for being here, appreciate your time, appreciate your testimonies, and the fact that you've made it clear, very clear that there are a lot of evolving tax issues um at the intersection of sports, with sports, so uh thanks, and especially when it comes to our college athletic programs with the amounts of, the ridiculous amounts of money in NIL revenue uh flowing, just being given to students. Uh, I mean, which I think it's important that you're here today, and I do appreciate this hearing, that we kind of have a responsibility to get the tax rules right, to modernize the tax code and ensure that it remains, as best as you can with a tax code, clear, consistent, and so easy that student athletes can comply with it. Now, uh, and, and I apologize, Mister Acho, that's it, cool. Mister Acho, um, appreciated your testimony. about the need to ensure that college athletes have that type of guidance they need to navigate uh these increasingly complicated tax obligations. But I guess, and I and you've you've hit on this, but if you could repeat yourself when it says to when when you say who is the best position to provide that guidance? Should it the responsibility primarily fall on universities, NIL collectives, booster organizations, agents, who?

I think you. I really do. I think that Congress has a great opportunity to continue to educate, not just athletes, but I think the word that was used is young taxpayers. I mean, I look at, think about my time in in college and and post-college, there's been very little tax education.

Yeah.

Very, very little.

I have to

Even financial education has a a very broad scope. I do not think that an agent should be responsible for tax guidance. You could argue that financial advisors should be, but for whatever reason, many financial large financial publicly traded institutions are passing the buck as well.

Yeah.

And so, uh, I think that's where Congress can step in and - and potentially mandate financial education or tax education if there's a - an opportunity for that.

Let - let me - So I - As I say, we do a great job authorizing bills. We don't do so good of a job implementing bills. And so I get the authorization part of it, but let's talk about the implementation part of it. who do you think would be the best entity to deliver these types of regulations, if we were then to put them in effect and authorize them?

Yeah. Yeah.

Correct, Mister Panetta, so if you were to authorize it, I think it would be incumbent upon the universities to implement that type of, financial and tax education and enforcement.

Would there be a conflict, though, and how could we ensure that it's in the athletes' best interest, though?

Mm. So that's another phenomenal question, now we're talking. Uh, so, A a little bit of the work that I get a chance to do is, and why I do what I do, yes, I'm on ESPN, but I work at an athlete family office. And the way we say is we're the only family office that's thinking about the next hundred years for athletes. We're not publicly traded, we're privately owned, and our job is to come alongside athletes and to be that trusted advisor. And so I'm stepping in that role along with some of my colleagues to go and, and give that advice. And that's advice that's specific to the athletes we work with in baseball, and football, and basketball, and golf. and women's sports as well. And so there are organizations that could do that on the outside that would not have that conflict of interest, but they cannot be these publicly traded financial institutions where you see their name brands on stadiums or on commercials, cuz they have different incentives. Their incentives are to increase shareholder value, not to do what's best for the athlete.

Yeah, understood. Thanks for that answer. I appreciate that. Um, I guess, uh, Mister Madden, do you see a role for the IRS? in providing additional guidance, and if so, what areas would benefit the most from greater clarity?

Yeah, first of all, I'd like to just follow up, if I may.

Please.

Um, the firm that I represent as a tax consultant scout, I mentioned in my uh opening statement, has contracts with approximately forty schools throughout the country to provide, they do payment processing, getting the money from the schools to the athletes, but also financial literacy training, investment advice, uh business structures, taxes, so um I'm proud of my relationship that I've developed and that's that's one way. The schools, the universities, there's great diversity there, some are extremely interested in making sure the athletes have that up that knowledge up front, whether it's an orientation or team sessions, uh one-on-one sessions, uh some coaches are very active in having their athletes set up, I've seen them set up Roth IRAs for an entire team. and some others say they're making the money, let them figure it out themselves. So I just wanted to be on the record, on the record for that.

Got it. And in regards, oh, and I appreciate that, and I got six seconds left. In regards to the IRS, I'll show you the thing.

IRS has issued through their, the Taxpayer Advocate's service advice for NIL athletes and collectives, but it's not really specifically geared towards them. It's what would be available for any um, self-employed individual. Um. It's all new, there's no regulations, there's no industry standards, there's no tax court cases for precedent because NIL is so new. But they have made that effort.

Great. Again, gentlemen, thank you. Thank you, Mr. Chairman. I yield back. Thank you, Miss Van Duyn.

Thank you very much, Mr. Chairman. This is fascinating. I I love hearing this conversation on I wish that this was happening fifteen years ago.

Mm-hmm.

So before I entered into Congress, I was actually on the city council in Irving, Texas. I was mayor of Irving, Texas. And I was there when we were having all the negotiations between the owners of the Dallas Cowboys in the cities in the Metroplex trying to figure out where they were gonna put the next stadium. We were trying to make a bid for it. You were exactly right. If other if other city councils didn't make those decisions, city managers didn't make those decisions, we wouldn't be spending hundreds of millions of dollars. So Texas Stadium was owned by the city of Irving, which meant that they didn't have to pay any property taxes on it. Sales taxes from on on food sales alcohol sales in the stadium were rebated. Ticket taxes were rebated. The only thing really that the city got from it was one point five million dollars a year in a lease. That one point five million dollars was put into a Texas stadium fund to pay for the maintenance of that stadium. And when the owner decided to move to a different city, that was scrubbed. So when we were like having to face the dilemma, okay, does the city pay what they were asking for at that time, which is gonna be three hundred and twenty-five million dollars? for the price of a new stadium, that was just gonna be the city's portion, which ended up being, if you added, it would have been, with interest and fees, about four hundred and ninety million dollars. Did it make sense for the city to be able to do that? We weren't even asked to compete because quite honestly when you said that those dollars are going to other areas, what we had to choose between is either funding our public transit system or not. That's where those dollars were going. And so the city of Arlington was the largest city without a public transit system. they had that one cent in sales tax that they could give to build a new a new stadium. So they forgoed they they they forwent their um um infrastructure development in lieu of getting a a stadium there. And now when you sit here and you think about I saw all the economic impact studies and they were very, let's just say, generous at best. They included everything that was spent in that city from restaurants, from gas, from hotel. We are actually getting more money now on game days than we were when the stadium was in the city of Irving. And what we did is instead of forgoing our public transit and other things, we started investing more in our in our in our our infrastructure, in our business practices. And as a result, the city of Irving has thrived. We have not lost anything since the Cowboys decided to move to Arlington. We've actually thrived. So we've had businesses, small businesses that have come, one of the largest, you know, fastest growing cities uh in the state, in the country, McKesson, Caterpillar, Wells Fargo, all relocated to the city of Irving. We haven't lost anything. But what I think what what did happen is you have a city right, you know, uh, uh, next to us that had to contribute three hundred and twenty-five million dollars to this. And exactly what you were saying, what was the economic impact to the region? I would say hardly anything. I don't know that they grew any more just by moving a city over, but they made the cities compete. They made this c- the cities actually have to fork over those dollars. So I very much appreciate this. This pattern, though, of the economic impact studies, and cities will say that they're great because they have to basically defend the actions in in the votes that that their elected officials have made. But this pattern raises really important questions for, I think, federal tax policy. When tax-exempt municipal bonds subsidize these projects based on optimistic pro- projections, federal taxpayers help underwrite outcomes that frequently fall short. As we examine sports industry tax rules, we really need to consider stronger independent verification. of economic claims, greater accountability, and reforms to better align federal tax advantages with verifiable net public benefits. Mister Coats, you've researched this extensively and you've expressed a lot of pessimism around whether these local economic benefits actually materialize. I'm interested in the case of the Dallas Cowboys in your opinion. Who would you say in Texas gained and who lost in the Cowboys' relocation from Irving to Arlington?

Well, Jerry Jones gained for sure. There's no doubt about that. Um. Who else gained? Well, I would say any any fan of the Dallas Cowboys who lived sort of west of halfway between Irving and Arlington. And who lost? Any Dallas Cowboys fan who lived east of halfway between the two, because it increased their commute or decreased their commute. Um. I I find it interesting that you mentioned, uh, Miss Van Duyn, that that you take in more money on game day now than you did and i think that's not terribly surprising but very few people ever mention such a thing and why is that the case well maybe people don't wanna do that extra drive and so they're staying in the bars and restaurants that already exist in their community as opposed to going into the stadium and so those restaurants and bars in the local community see that benefit you know if you go into a sports bar you can watch every game And that's one of the things that happened. So yeah, I absolutely am, I think that the people who benefited are on one side of the city, the people who lost are on the other side of the city.

I appreciate that and you're back, thank you.

Thank you, Mister Feenstra.

Thank you uh, Mister Chairman and Ranking Member, I I really appreciate this hearing. Uh, the business of sports continues to grow, I mean it's probably the econo- most important economic engine in our country, I mean it just continues to flourish, you see what's happening, whether it be the NBA, NFL, collegiate sports. It is just phenomenal what's happening i- in our country. So I applaud that. Here's the problem. I have three kids. They all play collegiate sports. So when they graduate from high school at the age of eighteen, all of a sudden they become their own little independent contractor. Think about that. This eighteen year old kid who's played sports all his life, probably doesn't know a lot about business, and now is in line to be their own independent contractor. Sources of NIL NIL income, content creator, sports uh social media influence, brand endorsements, sponsorship deals, autograph fees, promotional appearances, marketing brands, guest appearances, exhibition, endorsements, gifts, giveaways. So taxable income, all right, from the rep department of revenue can be in-kind, it can be cash, it can be non-cash compensation. All right, kids have no idea what that is. They get a ten ninety-nine, they what is this? Now on the other side of it, on the other side of the ledger, all right, if these kids understood what it means to be an independent contractor, they could deduct some of this ordinary and necessary income. They could deduct marketing materials, they could deduct professional websites, agents, legal fees, equipment, and it goes on and on. No one's telling these kids this stuff. So I'd like to ask you, Mister Mat- Mat- Mister Madden and Mister uh uh H- HO, What can we d- how can we put some parameters on this, but how can we have the, you know, NIL collectives and the universities say, " Hey, we gotta teach you about this before we go down this path." How, how do we go down the, how do we start doing this?

That's the uh, that's the million dollar question, isn't it? Um, the young people that are coming into college sports, and like I said earlier, it's trickling down at the high school level. I think there was a report last week of a high school athlete that's claims he spent eighty thousand dollars on his senior prom

wow

um i've met with athletes one athlete helped prepare their return they had thirteen income documents they had to find including their ten ninety eight t's they had transferred

right

from one school to the other but um one of the misconceptions in the nil world uh by both athletes and administrators is that tuition is tax or scholarships are tax free that's only partially true

that's partially that's right

the tuition and any related fees and expenses related to tuition is tax exempt but room and board,

Yes.

which all of them are receiving, is fully taxable.

That's right.

There's ordinary income, not self-employment tax. So, um, the collectives that I've had experiences with don't seem to be that, um, interested in that financial literacy portion.

Right.

It's, it really goes to the universities and having many of the universities now have directors of NIL and staff under them and that's in my relationship with scout that's who we deal with and there's some

and and if i uh guess the larger you know sec big ten can do that division two where my my kids played nai alright that's a whole different game and yet these things

right

still apply

but i'm sure there's still some opportunities for them to earn nil income i had one

yeah

athlete that came to me to help him prepare his tax return and he had won ten ten ninety nine from his collective and it was for two hundred and forty thousand dollars and i said well there is our starting He said, " I did not receive two hundred and forty thousand dollars. I did not." I said, " Well,

Right.

go back to the collective," and I tell this story for several reasons.

Right. Yep.

He said, " Go back to the collective and ask for an itemized list of where this two hundred and forty comes from." And he did.

Sure.

And guess what? They bought him a truck.

There you go.

Fifty thousand dollars.

Yep.

They paid his room and board, an off-campus apartment.

Yep.

Paid all of his utilities. He even got in a dispute with the landlord over some damages to the apartment. The landlord sued him. the um collective paid eight thousand dollars to make that suit go away. Guess what? It added up to two hundred and forty thousand dollars.

That's right.

His tax bill was about seventy-five to eighty thousand. Fortunately, he saved the money. He thought he had enough money. He graduated. He didn't get drafted. He has a uh a young wife and a child, and he thought he had enough money for a down payment on a house. Guess what? He spent sent that money to the IRS.

Nope. Yep, yep. Hey, Jim, uh, Joe, can you exp- what what what do we as Congress need to do?

One one option is to uh mandate that anyone who's giving advice to these athletes has to have a fiduciary responsibility to these athletes so think about it, if you are uh under the SEC or you're under FINRA, SEC your fiduciary independent advisor or FINRA you have to, you know it's uh what's reasonably best for them and so that's one area. Many of these athletes that we work with that he wor- that you know, mister Madden works with, they have financial advisors and they think they're doing the right things,

Yeah.

but those financial advisors are not giving them They're the best advice. They're sitting on the opposite side of the table.

Exactly. I'm sure none of them are taking the deductions they probably could. I mean, that's the other side of it. Anyway, thank you so much, all of you, I'd love to ask more questions, but I'll yield back. Thank you. Mister Horsford.

Thank you to the Chairman and to the Ranking Member. Uh, just over a month ago, the Allegiant Stadium once again demonstrated why world-class venues matter to Southern Nevada. Four sold-out concerts, BTS concerts, brought hundreds of thousands of visitors to Las Vegas. They stayed in our hotels, dined at our restaurants, shopped at our small businesses, and explored neighborhoods throughout our valley. The impact was extraordinary. The Las Vegas Convention and Visitors Authority estimated that those events generated more than three hundred and forty million dollars in economic activity. Some retailers reported sales increases of fifty to sixty percent. And that's just one example. According to the Raiders' twenty twenty-five impact playbook, Allegiant Stadium welcomed nearly eight hundred and sixty-five thousand visitors across thirty events last year alone, including more than five hundred and thirty-six thousand people who traveled to Las Vegas specifically because of those events. Together, these events generated more than one point one billion dollars in economic activity, including a hundred and twenty-three million in hotel spending and a hundred and seventy-nine million in gaming revenue. This is why it makes it the highest revenue-generating stadium in the United States. That success reflects a uniquely Nevada partnership. The Allegiant Stadium is publicly owned, privately operated. It was built by labor, supported by local government and our business community and the community at large. Today it stands as one of the most successful sports and entertainment venues in America. The lesson? World-class talent creates extraordinary economic value. The same principle applies to college athletics, in my opinion. Talent creates economic ecosystems. According to the Knight-Newhouse College Athletics database, Division one athletics generated fourteen point six billion dollars, billion with a B, in revenue during the fiscal year twenty twenty four, more than every major s- professional sports league except the NFL. Student athletes drive media rights, sponsorships, ticket sales, merchandise, tourism, and university branding. Entire industries benefit from the value that they create. So with all due respect, student athletes are not the problem. The question before Congress isn't whether student athletes create economic value. They're the reason it it exists. It's their talent. The question is whether our tax policy ensures that they are the primary beneficiaries of the wealth that their talent creates, not some rented players, as Mister Acho rightfully pointed out. Mister Accio, you've listed and lived this experience firsthand. And I wanna thank you for your advocacy in putting the focus on student athletes and the need for them to have access to financial literacy. As Congress considers the future of N- NIL, should our priority be ensuring that student athletes, not just universities, collectives, conferences, agents, broadcasters, and everyone else around them, are the primary benefits of the economic value that they create, yes or no?

Yes. And if I may briefly add, I know you have the time. Oftentimes you'll hear at different panels and committees and see coaches, like Nick Saban, well-respected, but we forget that some of these coaches are getting paid ten, eleven, twelve million dollars and they're fine.

Yeah, they're They're

You hear from you hear from commissioners and they're fine, but the players are the ones struggling.

So, so instead of talking about what the student-athletes are spending their money on, Let's talk about what the uh college uh and and coaches are spending their money on. Mister Chairman, I'd also like to address one final issue that is critically important to Nevada, especially. Tourism and gaming remain at the heart of our state's economy, yet the majority recently changed this tax code in a way that penalizes people who don't actually earn income. For decades, taxpayers uh taxpayers paid taxes on their net gambling winnings. If someone won a hundred thousand and lost a hundred thousand, they broke even and owed no tax because they had no income. Today, because of Senate changes made in H. R. one, gambling losses are deductible only up to ninety percent. That means someone who breaks even can still owe federal income taxes. That is fundamentally unfair and I want to thank and appreciate Chairman Smith for your commitment in working in a bipartisan way, along with Congressman Max Miller, for partnering with me on the Full House Act to restore fairness to the tax code. Mister Raiola, why should taxpayers be required to pay taxes on income they never actually owned or earned?

That's definitely a s- a law that's gotta be changed. And we talked about teams moving. The Raiders moved from California to Nevada.

Nevada.

which was a wind Nevada, yes, which was a windfall

Nevada.

Sorry, grew up in New York. Um, so it was a windfall for the players because they went from the state playing in the highest state tax rate, California, to no state tax, Nevada. But I I

Nevada. No, it's Nevada.

Nevada, OK. So as as much as uh There's no way that a a a gentleman or a woman who gambles and breaks even should pay any tax. That's just not right.

I I agree with you th- with that. We'll keep working on how to pronounce our state. Thank you, Mr. Chairman, for this hearing. I yield back.

Thank you, Mr. Kerry.

Uh, I want to thank the Chairman, I also want to thank the ranking member for convening this hearing on a hearing on sports and tax treatment of both collegiate and professional levels. I know there's been a lot of talk about professional teams, their identity to a certain area, I I would just make mention the Rams' first move wasn't from Los Angeles to St. Louis. As a matter of fact, it moved from Cleveland, Ohio in nineteen forty-five. Now the identity with the Rams in Cleveland kind of changed because Paul Brown, who was the uh one of the best coaches in Ohio State's history, uh wound up creating the Browns in Cleveland, Ohio, who subsequently then left and then moved to uh the team up north of this city. uh, which I will still not mention their name, but I mean, Ohio has had a long history with sports teams, going back to the Cincinnati Red Stockings in eighteen sixty nine, uh, to obviously the Cleveland, I believe it was called the Forest Cities before they were ultimately the Spiders, and now today the Guardians. But I do wanna highlight a couple things that Ohio does, and I think it's important because we have had professional sports teams throughout, uh, since eighteen sixty nine in the state of Ohio. But in Columbus, for example, Right now we are working with the National Women's Soccer League on an expansion team. And so the ownership group has worked with the City of Columbus to collaboratively construct a deal to build a new women's professional soccer team, and a new training facility. And we're working out some of those details. But one of the things that we have been able to do, um, has been working in a, in a kind of a, uh, a, a, a, a, a, a multi- a multi-community, it's called the New Community Authority. And this is um a statutorily created political subdivision um and it actually comprises of both the public and private sectors which has the authority under the Ohio Revised Code to actually do its own type of bonds. And this way the city of Columbus gets all the new tax income from the new jobs and the Franklin County gets all the new sales tax. The way they do this is the ownership group agreed to a self-imposed ticket tax of an additional two percent on all of the men and women sporting events at Schatz Miracle Grove Stadium, which is where the Columbus crew plays, and serves as a dedicated revenue stre- revenue stream to retire the bond debt. The new community boards are less expensive for a project's capital tax, both because of the tax-exempt status and the better credit ratings generally on the bond market. There are creative ways for local governments to work with professional teams in a private-public partnership to create significant new revenue for local and state governments. So, I wanted to highlight that, which we are doing in Ohio. And of course, Ohio has many other sports teams. But I do have one question, Mister Manayte, and I wanted to get into the - the - the coll- the collegiate side of it, but a foreign athlete can have a flat percent skimmed right off the top. Correct? Plus a pile uh of treaty questions uh many schools don't know the answer to. So, are these athletes getting shut out of money their teammates are taking home or walking into tax trouble that they never saw possibly coming?

Yeah, well, until the - an- uh, thank you for the question, Representative Kerry. Um, until the house settlement around this time last year was implemented, I believe July first of last year, international athletes were not earning any NIL income whatsoever due to the uh employment restrictions that come with their F one visa. Uh many times I have to remind athletes, their families, even c- school administrators that an F one visa is to attend uh the u- the college or the university. uh, not to play the sport that they're there for. So that - that they're there for. So that's the reason for that employment restriction. Uh, with the pa- with the settlement of the House case, um, many of the schools and some immigration lawyers, uh, there's some disagreement. Some - some have floated this as totally acceptable. Some have some issues with it. But they thought that classifying rev share payments to internationals as passive royalty income, would allow for um uh wouldn't wouldn't reach the threshold of the employment restrictions on their F one visa. So many international athletes are now earning rev share uh income from the schools, but the contracts are carefully worded to make sure that it is not active income they're not being asked to do anything actively like make appearances or promote products or anything like that.

Well, and, and I had few more questions I will submit them for the record but uh uh again thank you Mr. Chairman thank the witnesses for being here and with that I yield.

Thank you, Mister Fitzpatrick.

Thank you Chairman Smith, thank you to the witnesses for being here, um as has been discussed um throughout this hearing one of the less discussed aspects of NIL is that the tax consequences can be just as significant as the compensation itself as NIL marketplace has grown in size and sophistication Student athletes are increasingly confronting the financial and tax issues that would challenge even the most seasoned tax professional. Unlike a traditional employee receiving a W-two paycheck, student athletes may receive compensation through a variety of arrangements that can create tax liabilities before they even see cash in hand. A good portion of NIL so-called payments are not cash at all, they're not checks, they're not deposited deposits. They are assets. It could be a vehicle, it could be free gear, travel. or sometimes a piece of a company. As a result, student athletes can find themselves owing taxes on income that they received in forms other than cash creating financial obligations that many do not fully anticipate or even understand um mister Iola the IRS treats those items uh as taxable compensation and failing to report them is one of the quickest ways, obviously, to get audited. When an athlete gets handed um an asset it could be a vehicle um they owe real taxes on it but they cannot exactly pay a cash tax bill with a um a physical asset um how does um how does that get sorted out in practice

sure they take a look at the fair market value and the MSRP of the vehicle and there that's what they pay tax on this happened um when with the Met's when juan soto promised a car rep Beaty if he uh made certain achievements and he had to give him a car and Beaty was taxed on the value of the car so you're correct vehicles are taxable but there are other things like uh equipment you know cellphone what not other things that are not cash but would be taxable to the student athlete

Mister Madden who determines the dollar value of something like this is it the athlete the collective the company giving it away or someone else

Ultimately, it is the uh provider uh whoever provides the asset in our in this situation to the athlete um the athlete can dispute that the athlete could go back to the collective or the uh maybe it's the car dealership itself uh to dispute that value uh the athlete is under no obligation uh to list that full amount on their tax return they can provide an explanation if they disagree with it but then it would be up to them to whether it would uphold to the scrutiny of an audit if the tax return got audited, but to answer your question, uh Congressman, it's up to the uh payer to provide the value of that asset on the ten ninety-nine.

I think yeah, I think these evaluation questions pretty much highlight the larger challenge that are facing our student-athletes, uh as NIL NIL arrangements uh become com- inc- increasingly complex, um to any of our witnesses um from a compliance standpoint. uh are there best practices uh that schools collectives or third party organizations could adopt to help ensure student athletes understand both the immediate value of a deal and the tax uh obligations that follow.

One option could be for contracts to be stated uh not just in what could happen but actually guaranteed income. So there's that revenue portion and there's the NIL portion. The NIL portion a lot of the athletes aren't seeing NIL portion because uh some of those uh offers are getting rejected by that NIL go group. Whereas the revenue share piece of the contract is guaranteed. You see in professional contracts you'll see a a player sign a three year, ninety million dollar contract, but only thirty million of that is guaranteed for skill and injury. And so that's one potential option just to show uh the guaranteed portion of those contracts.

Got it. I thank our witnesses. Mister Chairman, are you back?

Miss Malay Takis.

Thank you, Mister Chairman, uh for holding this hearing and I thank you, all our witnesses for appearing here today before our committee. As the only member of this committee from New York City, I'd f- I'd like to recognize the incredible championship series, season of the New York Knicks first and foremost. It was great to see the team after fifty-three years bring the NBA trophy back to the greatest city in the world, New York City, and it's for the first time in my lifetime. I'd like to commend Coach Mike Brown, James Dolan, and the team's outstanding players, but I'd also be remiss if I did not highlight a provision of the tax code that disproportionately affects both the Knicks and New York's hockey team, the Rangers. Section one sixty-two M of the tax code limits how much compensation a public company can deduct for certain highly compensated executives. The American Rescue Act of twenty twenty-one expanded this provision to also apply to a company's next five highest paid employees. Now, that change has a delayed effective date and will take place for the first time at the end of this year. But now here's the problem, it expands the provision to cover employees, not just executives, and it creates a unique and unintended consequence for our professional sports. Using the Knicks as an example, once this provision takes effect, the team will no longer be able to deduct the salaries of its five highest paid players while every other NBA team will still be able to do so. Now that will cost the Knicks more than fifty million dollars each year, while every other NBA team faces no additional tax burden. And this is not a case of excessive executive compensation or golden parachutes. The NBA operates under a collective bargaining agreement that establishes both minimum and maximum player salaries. Teams do not independently determine player compensation in the same way that set executive pay. This expansion raises a fundamental fairness issue. Professional sports teams should not face a competitive disadvantage simply because of their ownership structure. In fact, this issue affects only three professional sports franchises nationwide the New York Knicks the New York Rangers and the Atlanta Braves. So, are so, they are the only because they are the only publicly traded sports teams, every other team in the major professional sports leagues are obviously treated then very differently. Uh, Mister Chairman, I would like to enter into the record a letter from our colleague from Georgia, Mister Brian Jack, who has been working with me to address this unintended competitive disadvantage.

Without objection.

Every other team in major professional sports, as I said, is treated differently under the tax code uh because they are not owed by owned by a publicly traded company. Now, uh with that said, uh my question is to Mister Raiola, um only these three

I don't know that the changes I'm about to recommend would simplify. I don't know that the changes I'm about to recommend would simplify I think it should be f- for all professional sports teams, I think it should be f- for all professional sports teams, not just for the Knicks, not just for the Knicks, the Rangers and the Braves. the Rangers and the Brares. And it's part of it, if you guys put it into law, it's part of what would exist, and then teams have to learn how to deal with it and how to comply with it.

So either everybody's gotta do it or nobody does it, uh from the sports world is what you're saying.

I think it's a it's having grown up in New York and being a big Knicks fan, I have a problem with that, even though these guys make plenty of money. But um I I don't think that's correct to You know

We should clarify. We should clarify that it shouldn't be these sports uh teams that are publicly owned.

Right. Should be all.

Great. Um and then I also want to bring up another issue uh New York sports fans are increasingly being forced to buy multiple streaming subscriptions just to watch their local teams Yankees and Mets games are spread across different platforms and the Buffalo Bills first regular season home game in their new publicly funded stadium will be streamed nationally on an exclusive platform. In fact, if you are a Bills fan, you'll need to spend about six hundred dollars in subscriptions for these platforms to watch the entire season. And that seems really unfair, especially for New Yorker taxpayers who helped finance the stadium. And so, you know, there wasn't a hearing that another committee had on this issue. I encourage both the FCC and the Department of Justice to examine whether these broadcast and streaming practices are limiting consumer access or harming competition and to ensure that local sports remains accessible and affordable for fans. The bottom line is you shouldn't have to be paying three subscriptions to be able to watch a full season of your favorite sports team. Do you guys agree? Mister Arjo?

Yes.

Mister Madden?

Yes.

Mister Rayola?

Yes, definitely.

Doctor Coates?

Yes.

All right, four for four, you guys agree with me and I think that Congress needs to address this if it needs congressional action. It may be able to be addressed already by the FCC and Department of Justice, by looking at antitrust laws. Thank you very much. I yield back.

Mister Yackem.

Thank you, Mister Chairman, for holding this hearing and thank you to our witnesses for being here today on this very important and complicated topic. It's no understatement to say that name, image and likeness or NIL has represented a sea change in college athletics. I hail from the Hoosier State. I'm proud to represent Notre Dame, which is in my district, Of course, it has a storied football tradition and history. But this year was a little bit different for the state of Indiana. A different university in the st- in the state demonstrated how transformative NIL can be. The IU Hoosiers, which had won just three bowl games between eighteen ninety-nine and twenty-twenty-four won three bowl games this past year in just nineteen days, en route to winning their first national championship in football. We can and should celebrate IU's Cinderella season. But that's a story about just the team itself. What about the individuals? NIL can be transformational uh for athlet athletes too. Life-changing sums of money for kids from all walks of life. Including those, they didn't necessarily grow up in the best of circumstances. Mister Acho, what you lay out in your testimony is a side of NIL that everyone should be talking about so much more. Sometimes money is promised and not delivered. Sometimes money is delivered without any guidance or mentorship on how to handle the boring stuff like IRS paperwork, or the really, really difficult stuff like dealing with agents or family or friends who are asking for a cut of the money. There are the the heartbreaking stories that you shared and laid out are certainly bringing light to some of the things that we should be talking about, and I certainly appreciate you doing so. I also appreciate the fact that you brought some ideas to the table as well. This committee does have some work to do on this topic, and at the same time, there's plenty that can be accomplished without needing an act of Congress. Ultimately, Congress shouldn't have to tell athletic departments to take care of the kids. They should just do it and act on it. Out of curiosity, I reached out to Notre Dame before this hearing to see what they do. In twenty twenty four, they rolled out a program they call Four for Forever. It's available to any student athlete who participates in NIL and even the ones who don't. Their program rests on four pillars, career and connection, community and belonging, life skills, and life after Notre Dame. I won't get into all that what that entails, but for the purposes of our hearing today, they help with things like tax education, financial literacy planning, mentorship, and some of the tough questions that I mentioned earlier. This initiative has four full-time employees that bring in outside experts and on legal and financial questions as needed. From my perspective, it's pretty comprehensive. But I know our panelists have seen, heard, and heard, and done more on this topic. So, Mister Ancho, imagine that you're the athletic director of your alma mater in Austin, or maybe somewhere else where donors basically have their checkbooks and they're willing to give you as much cash as you want to fund your department. What policies and practices does AD O- O- O- Ocho institute to build life skills and financial literacy in the age of NIL? And does it look like what Notre Dame is doing, or is there another school you think that's doing something that's worth highlighting?

I'm really honored to be be able to respond to that question. I was a part of that For For Forever program. Notre Dame brought me and my team in to do not only financial education, but we also they also brought us in a second time two years later to talk about athletes being CEOs, now that they're running their own small businesses, and the whole idea was don't build a brand, build a business. We talked about the five skill sets that it takes to be a CEO. One of those skill sets, as you can imagine, is taxes. And so if I were the athletic director of any school, I would implement the exact program that Notre Dame has implemented under their former director of player engagement, Amir Carlyle, who is now a part of the NFL office, who is now leading this initiative for the NFL and NFL teams. force is not the best word, but I would encourage uh college teams to implement not just financial education, but also business education for these student-athletes about understanding branding, understanding agents, understanding contracts, understanding how they need to create value, how they can capture that value, how they can convert that value into a business asset, and that c- and how they can continue that value for the next hundred years.

Thank you so much. I appreciate your engagement here today. And, Mr. Chairman, with that I yield back.

Mr. Miller.

Thank you, Mr. Chairman. Growing up in Northeast Ohio, just a twenty minute drive away from downtown Cleveland, been a sports fan my entire life, uh mostly all professional, uh but has resulted in only one professional championship between the Browns and the Cavs and the Guardians. So thankfully we have Ohio State to keep, you know, our spirits up a little bit in the state of Ohio. So The business of sports in the United States has never been bigger than right now. Although my younger self might be embarrassed to hear me say this, the federal tax questions this growth, raises, have never been more consequential. We're here to grapple with a number of issues, including how NIL has fundamentally altered the economics of college athletics, to examine whether professional sports leagues should continue to receive non-profit status and determine if the tax code written for a very different era has kept pace with a multi-billion dollar industry that touches every congressional district in America. These aren't abstract issues. They affect families, universities, and local economies as both fans and as taxpayers, as we've heard throughout all day today. In general, pu- publicly held companies cannot deduct compensation over one million for some executives and a number of their highest paid employees. A few sports teams are impacted by this limitation, specifically the Atlanta Braves, the New York Knicks, and the New York Rangers. Uh, Mr. Raiola, what is the impact of this limitation for select teams on the competitiveness of professional sports? Will this be a significant competitive disadvantage for those teams?

Be another business expense that won't be deductible, um, is n- starting in twenty-seven. I think, like I ma- mentioned previously, If it's going to be done, I think it should be done to all professional sports teams and, you know, remove the unfairness to the three teams in question.

Thank you. Mr. Rocha, I'd like to build on the line of questioning some of my colleagues were pursuing. Hand-in-hand with the decisions around tax withholding is the broader issue of foundational financial literacy for college students. In all honesty, when I was in college, I couldn't have told you the difference between a W-four, a W-two, two or a ten ninety nine. Actually, the financial literacy that I got was through the United States Marine Corps, when I graduated through boot camp and when young Marines got six to eight thousand dollars in their checking accounts and they thought they hit the lottery. And I remember drill instructors uh educating us on where things should go, and if we should put money in Navy Federal or Paris or Island Credit Federal Credit Union whatever it may have been and and so you know I that's just the reality of where we are. I think I've had a great education in this country, but not one educator who and I have a college degree and that's great. Uh, it's not what got me here, I believe the Marine Corps did in work ethic, but um, it's very scary. So given the reality, I I wanna move past the if and get to the how. In your view, where should the primary responsibility for this compliance lie? Was it with the institutions, the athletic departments, or governing bodies? And what specific oversight or mandate should this committee consider to ensure

Well thank you for your question, Mr. Miller. I think this committee, specifically when it comes to overs- overseeing uh taxes, uh could have an opportunity to enforce that people who are around athletes are actually searching for the best interests of those athletes. Some of that could be this idea of withholding taxes, so tax so uh taxes are getting paid. Another could be this idea of whether it's agents or specifically financial advisors if we're not gonna go to the institutions are mandated to um be a part of that tax conversation somehow some way and maybe it is uh being overseen by the securities and exchange commission so it seems as if uh universities are not gonna take that opportunity and so if it is gonna be the financial advisors in these athletes lives they have to have some sort of uh oversight to make sure they're looking for the athletes best interest.

Yeah and I'm okay with an amicable solution, but I I do think it is a little bit astonishing that the universities haven't accepted some responsibility as you are a student of that university and that university, when I went to a couple, you know, pledged to take care of me, uh, and look out for me in all of my best interests, right? And so you would think that this is something that in my opinion they would just wanna have just a little bit of oversight of because, you know, being very direct for people who can come into money very fast and they don't have the familiarity on what to do with it, it can do a lot of damage and it can lead people to go down very dark roads very quickly. And that is a big concern that I've seen with many people, even some friends of mine who have hit it big at a young age, and have gone down a very, very dark road. So, I mean, I I I love the conversation that we're having. I feel very positive on the outcome of how this is going to be handled. But I do put a little bit of pressure on universities to make sure that their student athletes are being you know emotionally and mentally okay with the amount of money that's coming in. Uh but thank you very much. Thank you all. Mister Chairman, I yield back.

Mister Morian.

Thank you Mister Chairman and uh good afternoon panelists. Thanks for uh hosting this meeting, this uh important committee hearing today. Mister Chairman, I appreciate all of your insights, particularly as they relate to the NIL issues. Uh this is a uh a an interesting topic that's come up uh for the federal government, not not the one that you would expect to come up. I know you guys have had a long day today. I wanna start with you Mister Ocho and just tell you first of all uh, how um, how taken back and appreciative I was at your comments when uh, when you started out your, your opening statement, particularly about uh, understanding that there needs to be a, a faith-based approach. Uh, frankly, uh, when you're, when we're talking about these kiddos, uh, and their youth and their age, I've got kids in that same age. Neither one of them are college athletes, but certainly there's still a lot of life to learn about. And uh, we are giving them so much money at a t- moment in time when uh they don't have that support structure or the, the education or the knowledge and the wisdom, that's really what it's about, is the wisdom to know, uh know what to do with it. Uh, so I wanna just tell you up front, I think your, your idea uh about uh financial education for student-athletes and creating opportunities for student-athletes to utilize tax advantage savings and investment accounts to help them prepare for the future is brilliant. I was texting my staff saying, " This is a great idea. We need to jump on that." Uh, is there something that you haven't said about that today that you wanna re-emphasize? Do you wanna make sure that you have had an opportunity to sell that idea? Because I think this is a really great idea.

I think the first thing I'll say, Mr. Moran, is these are more than just athletes and more than just students. They're also humans. And humans sometimes make bad decisions, sometimes make good decisions. And so what I'm after is human flourishing. And that's not just athletically. That comes with faith, you know, family, you could argue football, whatever sport you do, and also financially. So you may be flourishing financially, but if you have no idea of your f- uh uh no background in faith, it's probably not gonna end up very well. You might be flourishing in your faith, but if you've squandered and wasted your wealth, it's probably not gonna end up very well. And so we need to think of a more holistic approach. Part of that is the financial education piece. The other part of that is thinking about my sister, right? the Federal Reserve Bank in Dallas. They have a thrift plan where there's automatic, uh not even withholding, but automatic uh uh employer match. I understand these athletes are not employees, but one thing we've seen, that eighty-seven percent rate that we've talked about, uh when it comes to forcing people to save, right? Think about four one Ks, making people save money. When I was a part of the NFL Players Association, my job was to speak up on behalf of all the players and some things that we did was finding ways to have players save money. And so, if I were just to reiterate the point, the point would be to allow athletes to save a certain amount of money. Maybe it's similar to how they do in an individual's retirement account, or a four O one K, and have that money be able to grow tax deferred. And then give players access to that money earlier than that fifty nine and a half time frame because think about it the average career in the NFL is three years. I played in the NFL, I played for nine. I finished at thirty-two or thirty-one years old. That's still twenty more years before I get access to that money.

Yeah,

Yep.

I think you're right on target, and my kiddos, the way I tell them about it is like you're gonna have a lot of liberty in life, you're probably gonna have a lot more prosperity than most folks. But what needs to come with that is responsibility. There's gotta be self-responsibility built into that or it won't last. Even this weekend I was having a conversation with one of my kids about a matching plan for a job she's at now and I told her, I said, you know what the answer is always, when that is presented to you, the answer is always yes. You wanna participate, you wanna be involved in that. Uh, so thank you for your advocacy on that. Uh, I wanna come back to Mister Madden and Mister Rayola as well, because I wanna talk about uh the IRS and its its use of or its its its view of the NIL collectives as sometimes um tax exempt, and sometimes not. So the IRS has found that many NIL collectives should generally not qualify for uh tax exempt status because the private benefits they provide to student athletes do not serve a tax exempt status or purpose. Mister Madden, Mister Raola, could you talk us through the rationale NIL collectives provide for their tax exempt status, why might it make sense and why might it not? I'll start with you, Mr. Ayala or Mr. Mann.

Yeah, uh, thank you for the question, Representative Moran. Um, as I testified earlier, the collectives, uh, many of the collectives throughout the country after the, uh, Alston Supreme Court case and the NCAA's decision to allow athletes to monetize their NIL, uh, that that gave rise to the collectives, which are essentially boosters pooling their money. And many of them applied for tax exempt um status through the IRS, through the it would be the tax exempt and government entities business unit of IRS. NIL was brand new. No one really knew what it was. When I suggested that we have a nationwide enterprise-wide task force to study NIL at IRS, many of the commissioners, executives asked me what NIL was. And I think uh t- no fault of anyone at IRS because it was brand new, um many of the collectors were erroneously granted tax exempt status. It's the reason why in June of twenty twenty-three IRS chief counsel issued a memorandum clearly pointing out that most of the collectives as they saw them, did not qualify for tax tax exempt status because what they were doing is um pooling their money and uh paying athletes hundreds of thousands if not millions of dollars to make maybe two or three appearances a year maybe at an alumni event, maybe signing autographs, going to a children's hospital around the holidays, attending a sports camp in the summer, and it just didn't line up with the public good or a solely educational purpose.

Yeah, Miss Raella, we're out of time, but I'll just say in rela- relation to that, the donors, a lot of them gave, thinking it was gonna be tax exempt, and now they've got some tax issues related to that because it was unrolled in a lot of situations. Big complicated area, even in the tax base, appreciate all your testimony. Uh with that, Mr. uh Chairman, I yield back.

Thank you. I would like to thank our witnesses for almost four hours for for being here before our committee please be advised that members have two weeks to submit written questions to be answered later in writing those questions and your answers will be made part of the former formal hearing record with that the committee stands adjourned.