The State of Alabama Has Proposed a Recent Change in NIL Policy

On Wednesday, Pete Nakos of On3 reported that Alabama has joined the ranks of states introducing legislation aimed at giving its collegiate athletes a competitive edge.

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On Tuesday, state representative Joe Lovvorn presented a bill in the House that seeks to exempt Name, Image, and Likeness (NIL) earnings from Alabama's individual income tax. Currently, Alabama imposes a state income tax with rates between 2% to 5%.

What does this entail? Athletes would not have to pay state income tax on their NIL earnings. For instance, without this exemption, an athlete earning $5 million could face state taxes ranging from $100,000 (2% of $5,000,000) and $250,000 (5% of $5,000,000) in state taxes. With the exemption, the athlete would keep the entire $5,000,000 (or whatever price they are being offered).

This development follows a similar proposal made in the Georgia state senate earlier this month. The legislation would level the playing field for Alabama and Auburn, especially as Southeastern Conference states like Tennessee, Florida, and Texas do not impose an income tax.

Alabama state representatives Danny Garrett and Chris Blackshear were instrumental in drafting the proposed legislation.

If approved, the law would take effect on Oct. 1,2025, and would be retroactively applicable from Jan. 1,2025, remaining in force until 2027. Alabama joins a growing list of states seeking to give their universities and athletes an edge over the NCAA.

Across the nation, institutions are navigating a complex landscape of varying state regulations. Recently, lawmakers in Missouri and Texas have enacted measures to shield their schools from NCAA investigations related to NIL activities. Notably, Missouri's law permits high school recruits to engage in NIL agreements and start earning endorsement income upon signing with in-state colleges.

NCAA President Charlie Baker, along with college sports officials, is actively advocating for a federal NIL bill on Capitol Hill. Meanwhile, the House v. NCAA settlement is anticipated to commence on July 1, pending final approval this spring. In its first year, institutions will distribute $20.5 million in revenue sharing, with most Power Four schools expected to receive between $15-$17 million for their football programs.

If this legislation passes, Alabama could enhance its competitiveness in recruiting and improve its chances of retaining top talent.