The Cost of Being Paid (Part II of II): State Tax Policy and the Recruiting Advantage

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When the NCAA approved NIL compensation in 2021, few anticipated that state tax codes would become a new form of competitive advantage in college sports. Four years later, as athletes sign six-figure endorsement deals and appear in commercials, the tax location of those earnings now matters as much as the brand behind them.

The Return of the “Jock Tax”

Traditionally, the “jock tax” applied to professional athletes who earned income while performing in multiple states.[2] This required players to pay nonresident state income taxes wherever they competed for the portion of their total income earned through that performance.[3] Today, the same principle applies to NIL income.[4]

For example, if a student-athlete from Penn State travels to New York for a paid autograph signing, that income is taxable by New York — even though the athlete lives and goes to school elsewhere.The result is that NIL athletes, like their professional counterparts, may now face multi-state filing obligations depending on where they play games, make appearances, or film sponsorship content.[5] This system places a premium on meticulous record-keeping, forcing student-athletes to document where and when each NIL activity occurs to determine how much of their income will be taxable by each state.[6] Without accurate tracking, athletes risk underpayment penalties or double taxation — compliance burdens that require a level of tax sophistication many college students have never been taught to navigate.

Notably, nine states — including Texas, Florida, and Tennessee — do not levy personal income taxes at all, meaning NIL athletes owe no state-level tax on income earned there.[7] In contrast, athletes who perform NIL activities in California or New York, where top tax rates exceed 10%, will see a significant portion of their income diverted to state coffers.[8] This disparity has sparked a new dimension of competition — not on the field, but in the tax code.

States Strike Back: NIL Tax Break Legislation

Recognizing the growing financial stakes, some states have begun using tax incentives as recruiting tools. In May 2025, Arkansas became the first state to enact a law exempting NIL income from state taxation entirely.[9] The measure, known as Act 839, was designed to “level the playing field” with neighboring states like Texas and Tennessee, both of which are home to rival SEC schools and already have no state income tax.[10]

Other states, including Georgia, Alabama, Louisiana, New Jersey, North Carolina, South Carolina, and Illinois, have since introduced or debated similar bills aimed at exempting NIL income from state taxable income or offering partial tax credits to student-athletes.[11] Lawmakers argue these measures — which would cost the states about $750,000 in income tax revenue — could attract top recruits or retain in-state talent, giving local programs an edge over schools in higher-tax jurisdictions.[12]

While these proposals have drawn bipartisan support, critics question whether it is fair — or even constitutional — to create tax exemptions for one specific group of earners.[13] Still, the momentum suggests that NIL-driven tax competition among states is just beginning.

Taxes and Talent: The Recruiting Effect

Emerging academic research supports what many athletic directors have long suspected: state tax rates influence recruiting outcomes. Analyzing 787 recruiting observations across 136 Football Bowl Subdivision (“FBS”) programs from 2019 to 2024 confirmed this link, finding that schools in higher-tax states consistently recorded lower recruiting class scores and fewer top-ranked commitments than their counterparts in low- or no-tax jurisdictions.[14] 

The financial differences are substantial. Illustratively, a quarterback signing $1 million in NIL deals in Florida could save roughly $100,000–$130,000 annually compared to playing in California, where state income tax rates exceed 13%.[15] Over a four-year college career, those differences could add up to hundreds of thousands of dollars in take-home pay for young college-athletes. This reality gives schools in no-tax states an implicit financial advantage when pitching NIL potential to recruits.

The New Playing Field

As NIL matures, it’s becoming clear that state tax laws are shaping not just athletes’ wallets, but the competitive balance of college athletics. States are now legislating for the same reason coaches recruit — to attract elite talent. Whether these policies promote parity or deepen regional divides remains to be seen, but one thing is certain: in the NIL era, understanding tax law is just as critical as reading a playbook.

Easton Warner (guest writer) is a 2L at Villanova University Charles Widger School of Law. Easton is a Buffalo, New York native, and loyal Buffalo sports fan whose passion for sports started at a young age playing hockey. In 2024, Easton graduated summa cum laude from John Carroll University with a B.S. in Business Administration and a minor in Psychology. Following law school, Easton plans to pursue a career in Litigation. 

References:

[1] Photo by Alex Shuper on Unsplash. https://unsplash.com/photos/a-3d-map-of-the-united-states-H35wgn8pPc0.

[2] Anthem Strategists, Are NIL Athletes Subject to the Jock Tax? (May 20, 2025). https://anthemstrategists.com/jock-tax-nil/.

[3] Id.

[4] Id. 

[5] Id.

[6] See id.

[7] Andrew Seligman, In recruiting battle, lawmakers weigh whether to give college athletes a tax break on NIL earnings (April 1, 2025). https://apnews.com/article/nil-tax-break-college-athletes-ecb6168e18851c9154388c9c2e250209.

[8] See Andrey Yushkov, State Individual Income Tax Rates and Brackets, 2025 (February 18, 2025). https://taxfoundation.org/data/all/state/state-income-tax-rates/.

[9] 2025 Ark. ALS 839; Tax Notes, Recruiting College Athletes with Tax: Arkansas Act 839 (Oct. 16, 2025). https://www.taxnotes.com/tax-notes-today-state/code-and-regulations/arkansas-bill-exempts-student-athlete-income-taxation/2025/05/02/7s49q.

[10] Tax Notes, Recruiting College Athletes with Tax: Arkansas Act 839 (Oct. 16, 2025). https://www.taxnotes.com/tax-notes-today-state/code-and-regulations/arkansas-bill-exempts-student-athlete-income-taxation/2025/05/02/7s49q. 

[11] Tax Notes, Recruiting College Athletes with Tax: Arkansas Act 839 (Oct. 16, 2025). https://www.taxnotes.com/tax-notes-today-state/code-and-regulations/arkansas-bill-exempts-student-athlete-income-taxation/2025/05/02/7s49q; Nicholas Miller, New College Recruiting Pitch: Tax-Free NIL Earnings (January 20, 2026) National Conference of State Legislatures. https://www.ncsl.org/state-legislatures-news/details/new-college-recruiting-pitch-tax-free-nil-earnings. 

[12] Id. 

[13] Id.

[14] Badger, Chyz & Gaertner, The Impact of State Income Tax Rates on Recruiting in the NIL Era (May 2025). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5257493#:~:text=image%2C%20and%20likeness%20%28NIL%29,affects%20behavior%20and%20resource%20allocation.

[15] See Andrey Yushkov, State Individual Income Tax Rates and Brackets, 2025 (February 18, 2025). https://taxfoundation.org/data/all/state/state-income-tax-rates/.