Terri Sewell

With so many college athletes now becoming wealthy in the NIL era, an Alabama congresswoman says she wants to help them avoid being caught off guard when tax season arrives.

U.S. Rep. Terri Sewell (D-Birmingham) recently introduced the Protecting Student-Athletes from Unexpected Tax Liability Act, legislation to help athletes avoid unexpected federal tax bills and penalties they earn through name, image, and likeness agreements.

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

Sewell’s legislation would require a portion of NIL compensation to be automatically withheld for federal tax purposes, similar to the withholding that occurs with a traditional paycheck.

Sewell said her legislation is a step toward ensuring student-athletes are protected from tax burdens that could follow them long after their playing days are over.

Sewell said the need for legislation was underscored recently by Sam Acho, a nine-year NFL veteran and former NFL Players Association Vice President, who testified before the House Ways and Means Committee about the challenges facing college athletes navigating NIL compensation.

Acho during his testimony gave the example of an 18-year-old college athlete who earned $750,000 in NIL income but was left with just over $6,000 and a $320,000 tax bill because he did not understand his tax obligations or make estimated quarterly payments.

In his testimony, Acho urged Congress to act and specifically proposed automatic withholding for NIL income as a potential solution.

“I have heard troubling stories of student-athletes who were unaware of their tax obligations and later found themselves facing significant tax bills and penalties from the IRS after much of their NIL income had already been spent,” Sewell said. ”No young person should be blindsided by an unexpected tax liability simply because they did not understand the complex rules that came with their newfound income.”

The Supreme Court in 2021 curbed the National Collegiate Athletics Association’s authority to restrict students from receiving payments. The NCAA then allowed states to set their own rules. Student athletes can now earn money endorsements and other business partnerships without forfeiting their player eligibility.

Sewell has shown interest in NIL in recent years. In 2024, she hosted a panel featuring former Alabama Crimson Tide Coach Nick Saban to present his ideas about NIL and its impact on college football.

SEC Sewell represents the 7th District, which encompasses Tuscaloosa and Birmingham and includes the University of Alabama. And both the SEC and SWAC are headquartered in Birmingham.