Texas A&M Kills Controversial NIL Fund After IRS Memo, But Money Will Keep Flowing Through Minor Technicality

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Texas A&M has shut down its controversial 12th Man+ Fund after reviewing a memo from the IRS. That does not mean that the 12th Man Foundation is getting out of the NIL space, which is a common misconception.

The 12th Man Foundation, which was founded in 1950, serves as the university’s top fundraising arm for athletics. Its mission is to “fund scholarships, programs and facilities in support of championship athletics” and does so through an Affiliation Agreement with the university.

With the increased importance of Name, Image and Likeness funds in college sports, the Foundation launched the ’12th Man+ Fund’ back in February. The purpose was simple: raise as much money as possible to provide NIL money to Aggie athletes.

The 12th Man+ Fund was a crowdfunding platform to pay athletes, if we’re calling a spade a spade. Donors could send money to the fund. That money would be used to compensate athletes.

The Fund was considered to be the closest link between the traditional fundraising efforts of an athletic department and NIL dollars. It was rather controversial because, essentially, it was the first school-based NIL collective.

Texas A&M’s 12th Man+ Fund is dead.

The IRS sent out a nationwide memo back in June which told NIL collectives that their function is not tax-exempt. The 12th Man+ Fund rewarded donors for their NIL contributions with points within the athletic department as well as tax benefits.

That won’t fly. As a result, The Fund is no more.

Following consultation with external advisors, the 12th Man Foundation is altering its approach to NIL, which includes discontinuing the 12th Man+ Fund. This decision was made to ensure the 12th Man Foundation meets its high standards for compliance and to protect the organization’s mission.

— The 12th Man Foundation in a release

Although The Fund has been discontinued, Texas A&M is using something of a loophole to keep things rolling. The 12th Man Foundation remains committed to providing NIL opportunities for players through marketing efforts— not through direct payments.

Texas A&M is pivoting its focus.
(Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)

To do so, the Foundation is going to redirect its efforts.

[The Foundation] will no longer accept and solicit NIL-specific donations. Unrestricted donations will still be used for NIL deals with A&M athletes to market the Foundation.

— Mit Winter, NIL Attorney at Kennyhertz Perry LLC

Let’s break it down on a more simple level.

  • The 12th Man+ Fund solicited donations that was used to compensate athletes through NIL.
  • The IRS said that such donations are not tax-exempt.

In turn, the 12th Man+ Fund died. What’s next?

  • The 12th Man Foundation will contact donors who contributed to the Fund.
  • Donors will be able to switch their donation from the Fund to the Foundation.
  • Donations will be labeled as “unrestricted,” meaning that the Foundation can use that money how it pleases.
  • The Foundation will use those “unrestricted donations” to pay athletes through NIL.
  • Rather than simply getting paid, like they were through the Fund, athletes will get paid to promote the Foundation.

Problem solved.

Texas A&M and the 12th Man Foundation took nearly two months to process the IRS memo and think through a strategy for the future. It landed on a simple switch, to keep things moving on a slight adjustment/technicality that solves the tax-exempt issue and keeps money in the pockets of the Aggies.

So, yes, the 12th Man+ Fund is gone. It’s just not that big of deal.

Things are changing in terms of operations, but not at their core.

Written by Grayson Weir

Grayson doesn't drink coffee. He wakes up Jacked.

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