Can International Student-Athletes Benefit from NIL Agreements?

This article was expanded for additional publication by Law360 on Dec. 18, 2023 under the title How Int'l Student-Athlete Law Would Change The NIL Game.

Evolving NIL (name, image and likeness) policies are keeping universities and student-athletes on their toes. While some student-athletes are already bringing home six-figure deals, international student-athletes remain in the dark regarding their ability to cash in on NIL deals. An American education is very appealing but boasts some of the highest tuition rates in the world. As the costs of education continue to rise and NIL regulations start to take shape, international students and their universities need to understand the unique legal implications these deals present.  

The number of NCAA international student-athletes (ISAs) on U.S. college campuses has increased to upwards of 20,000. Twelve percent of Division 1 athletes are ISAs. ISAs face distinct challenges as they strive to maintain their immigration status, especially given their higher statistical likelihood of transferring (25%) compared to domestic student-athletes (14%). Additionally, they often report a lower sense of belonging than their domestic counterparts, underscoring the importance of gaining a deeper understanding of their unique experiences, including exploring NIL opportunities that align with their immigration concerns.

What laws govern international student-athletes?

ISAs typically enter the U.S. to study and compete using an F-1 visa. This non-immigrant visa requires full-time enrollment at an accredited college, university, seminary, conservatory, academic high school, elementary school, or other academic institution or language training program. ISAs who attend school in F-1 status are only permitted to work on campus while enrolled in school, unless they are approved for Curricular Practical Training, which allows them to work for a specific employer in their major area of study.

Although “NIL activities” are not yet expressly addressed by F-1 status regulations, ISAs in F-1 status must guard against activities that could be misconstrued as unauthorized employment. Only U.S.-based employment activities are regulated under U.S. immigration laws, so ISAs should strategically seek NIL activities on the international stage and in countries where admissibility and employment authorization are regulated according to the laws of the host country.

Some universities are advising ISAs to keep records of their travel, including entry to and exit from the U.S., and document their physical location to track activity engaged in outside of the U.S.

F-1 status regulations do not prohibit ISAs from generating passive income in the U.S. But passive income gained through employment must comply with limitations applicable to all international students in F-1 status. The regulatory distinction is critical to the earning potential of ISAs, whose status concerns are central to their ability to seize NIL opportunities.

Passive income includes earnings from a source other than an employer or contractor. IRS guidance states that passive income comes from a business in which one does not actively participate. Some schools advise that ISAs may engage in domestic activities that generate passive income. While this position has not been endorsed by the Department of Homeland Security (DHS), passive income that is generally acceptable includes licensing and photo products.

Students and universities should thoroughly evaluate ISAs’ NIL activity to walk the fine line that manages immigration status concerns unique to ISAs. As colleges, universities, athletic conferences and foreign students work to interpret the law without guidance from DHS, the stakes are high. If their interpretation is incorrect, ISAs may lose their immigration status and companies that compensate them may be in violation of U.S. immigration laws. 

Legislation is now pending to address this status limbo scenario that is of serious concern to ISAs. On Oct. 17, 2023, the NIL for International Collegiate Athletes Act was introduced by Senators Ricketts and Blumenthal. This legislation would create a sub-category visa class providing work authorization for NIL activity. Students in this sub-category would need to maintain their F-1 status to remain authorized for employment. Until legislation or further clarification is passed, NCAA colleges should carefully evaluate their NIL policies and need to include language that speaks to the grey area of ISAs.  

Tax implications

Any income from NIL activities, including non-cash, is considered taxable income to the student-athlete. Generally speaking, a U.S. citizen is subject to worldwide taxation, no matter where that money was derived. However, a citizen of a different country only has to pay U.S. taxes on income from sources within the United States. 

If an ISA receives payments from NIL activities in the U.S., they will have to pay taxes on the income earned and derived from these activities. Non-residents must report all income — including NIL payments — to the IRS, regardless of immigration status. Generally, state and federal taxes will be owed. Nevertheless, it’s important for the ISA to make sure that they are authorized for the type of work depending on their visa type. 

Alternatively, an ISA who is deemed a non-resident alien, files the proper paperwork, and has legal status in the U.S. as a student on an F-1 visa does not have to declare and will not be taxed on international income sources. 

Therefore, ISAs may have a workaround — traveling back to their home country or elsewhere abroad to engage in NIL activities. Their participation in NIL deals should not run afoul the current F-1 visa rules provided that they conduct their activities while abroad. However, ISAs need to be very careful and cease all employment once returning to the U.S.

Federal law v. state law

Some states require universities to provide education on NIL issues, financial management, etc. to student-athletes. However, it is not clear if universities with ISAs have a duty to educate ISAs on the added legal implications of international NIL activities.

ISAs must not enter into any NIL agreements without guidance from their university’s International Students Services office to guard against any potential immigration issues. International students enrolled at a university holding an F-1 visa may not be employed by an entity outside of the university without specific authorization on their I-20 by their F-1 advisor or from USCIS via an employment authorization document.

Please contact Nicholas Patti, Brandon Davis, Laura Buck, Casey O’Flynn, or any member of Phelps’ Litigation, Immigration or Tax teams if you have questions or need compliance advice and guidance. Nicholas Patti is a licensed athlete-agent in the State of Florida.