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Texas A&M believed to be first with official booster group funding NIL

On3 imageby:Andy Wittry02/16/23


The 12th Man Foundation, which Texas A&M says “funds more than half of the athletics department’s annual operating budget,” announced in conjunction with the school Wednesday that it has launched the 12th Man+ Fund to provide name, image and likeness opportunities for the school’s athletes.

Through an affiliate agreement, Texas A&M and the 12th Man Foundation have a relationship similar to other athletic departments that have independent fundraising arms. But Texas A&M is believed to be the first school whose official athletic booster organization also is directly fundraising NIL opportunities in this manner.

The 12th Man Foundation’s website states that it will “contract currently enrolled student-athletes to engage in promotional activities to further its mission. Promotional activities will include services such as social media posts, appearances at events, and speaking engagements.”

Basically, Texas A&M athletes will receive compensation to promote the 12th Man Foundation. The 12th Man+ Fund now is arguably the closest public link between traditional athletic department fundraising and NIL-related fundraising. As opposed to Texas A&M fans or donors who have established a new corporation to raise funds for NIL opportunities, the 12th Man Foundation is simply expanding the scope of its services to include NIL deals.

“From everything I’ve read about it and from my understanding of it, it’s compliant with the NCAA rules and Texas state NIL law and A&M’s NIL policy,” said Mit Winter, an attorney at the Kansas City-based law firm Kennyhertz Perry LLC. “So I don’t think there’s a problem there. I think other people probably haven’t done it just because from an optics point of view, it can look – I don’t know if ‘bad’ is the right word but like it’s too entangled with the university, so that’s probably why other people haven’t done it yet.

“Some other people have told me they’ve considered or have pushed athletics foundations to do something similar. I can’t tell you why A&M would be the first to do it.”

The 12th Man Foundation stressed online its independence from the university.

“The 12th Man Foundation is an independent 501(c)(3) in both fact and appearance,” the 12th Man Foundation website said. “The Foundation’s NIL-related activities are not conducted on behalf of Texas A&M University or Texas A&M Athletics at any time. The Foundation will not communicate with or involve the University regarding the negotiations with student-athletes related to NIL activities. The Foundation may communicate with the University regarding general compliance matters.”

Creation of 12th Man+ Fund follows tumultuous 2022 offseason

Given the current legal and governmental threats to the NCAA’s current model, the 12th Man+ Fund potentially could provide a preview of what college athlete compensation looks like in the future, if and when universities pay their athletes more directly.

Some coaches and administrators have suggested the possibility of bringing third-party NIL organizations, such as NIL collectives, in-house. That would provide university employees with greater oversight and insight into their athletes’ NIL opportunities and finances rather than being beholden to the operational decisions of fans or donors. It also could prevent potential brand confusion or donor fatigue. Athletic department fundraisers have lists of season-ticket holders and donors with whom they often have longstanding relationships.

It could avoid potential flareups, as The Swarm Collective has publicly clashed with Iowa‘s administration over a perceived lack of support, including the athletic department balking at the collective’s requests to receive lists of the university’s donors and season-ticket holders.

“The 12th Man Foundation’s got a 73-year history, right?” 12th Man Foundation President and CEO Travis Dabney told reporters Wednesday night. “So we’ve got some skins on the wall. People know who we are. We’re transparent.”

The creation of the 12th Man+ Fund has arguably turned that hypothetical model of bringing NIL operations in-house into a reality at the university whose football program received as much NIL-related scrutiny as any in the country last offseason.

The Aggies’ 2022 football recruiting class was rated as the best in the recruiting rankings era, according to the On3 Consensus. Alabama coach Nick Saban alleged that “A&M bought every player on their team.” Texas A&M coach Jimbo Fisher countered with a fiery news conference in which he called out Saban, and Texas A&M officials asked the SEC to consider suspending Saban.

In the end, The Bryan-College Station Eagle reported that Texas A&M athletes disclosed more than $4.1 million in NIL-related earnings in the first academic year of the NCAA’s NIL era. Football players reported roughly $3.3 million in earnings.

Many stakeholders in the NIL industry believe the number of NIL deals that aren’t disclosed to universities outnumber those that are.

12th Man+ Fund plans to pay athletes ‘fair market value’

Some Texas A&M donors previously referred to their combined NIL fundraising efforts, which reportedly operated through an LLC, with the unofficial, tongue-in-cheek name “The Fund,” The Athletic reported. Now, the 12th Man Foundation’s official NIL arm has a similar name: the 12th Man+ Fund.

“More than anything, this has been an evolving space, and we kind of sat back and looked over the last 18 months and the conversation that was happening at the 12th Man Foundation with our Board of Trustees and staff was, ‘Hey, how can we potentially be helpful and provide an advantage for Texas A&M University athletics?'” Dabney said.

The news release for the 12th Man+ Fund posted on Texas A&M’s athletic department website stated current A&M athletes will “receive fair market value compensation.” Dabney said the 12th Man Foundation with consult with an accounting firm to help establish fair-market value.

At the news conference, Dabney was asked if the 12th Man+ Fund is the first NIL collective in the country to operate under an athletic department’s booster club.

“Uh, so we’re not a collective,” Dabney said. “We are a 501(c)(3) that has supported Texas A&M athletics for 73 years. There is one other fundraising organization in the SEC that set up something similar to this – not exactly – and that is the Razorback Foundation at the University of Arkansas.”

The Arkansas Secretary of State’s website lists Razorback Foundation Executive Director and General Counsel Scott Varady as the registered agent of the collective ONEArkansas NIL, which is registered as an LLC.

There is not a universally accepted definition of “NIL collective.” Some collectives that have applied for 501(c)(3) status or operate under a 501(c)(3) organization literally have the word in their name, such as the Buffs4Life NIL Collective at Colorado, We Will Collective at Iowa State and the aforementioned The Swarm Collective.

The nature of NIL entities that are structured as 501(c)(3) organizations, including some NIL collectives, raise questions about their future. When the now-defunct collective Jackets For Atlanthrophy at Georgia Tech announced it dissolved last month, the organization shared a letter on its Twitter account that said new athletic director J Batt is “concerned that the tax-deductible option to contribute to NIL activities is likely to be eliminated at the hands of upcoming federal legislation and the IRS.”

“You can make an argument to some extent that, yes, student-athletes can engage in charitable work, whether or not a student-athlete really deserves to be compensated above and beyond a very, very reasonable, fair-market value rate, but is this not functionally what the university is doing now, right?” said Jason Belzer, who’s the founder and CEO of Student Athlete NIL (SANIL), which powers roughly 20 NIL collectives nationally. “How much money are you going to raise? How much money are you going to deploy?

“And can you really justify and can the IRS really justify saying, ‘Yeah, we’re fine giving people a tax deduction when this money is being used to essentially pay players’?”

Other schools, such as Clemson, Florida State and LSU, raise athletic department funds through an independent organization, which could theoretically allow them to pursue a model similar to either Arkansas or Texas A&M.

Fund’s highest tier starts at $25,000

Donors who contribute to the 12th Man+ Fund will have the option to fund NIL opportunities for a specific sport or to contribute to a general fund. Financial gifts can be made on a one-time or recurring basis.

The 12th Man Foundation’s website lists four tiers for donors, ranging from $25 to $149, $150 to $4,999, $5,000 to $24,999, and $25,000 or more. The release on Texas A&M’s website stated donations to the 12th Man+ Fund will be used only to fund NIL opportunities and “directly related administrative expenses.”

How many calls did Dabney receive from donors on the day of the announcement? “It was a lot,” he said. “I’m not trying to be coy. I really don’t know. … I know I don’t have any battery left on my phone.”

Many NIL collectives list on their website what percent of donations will go to athletes. A FAQ on the 12th Man Foundation’s website says, “The 12th Man Foundation will review contributions on an ongoing basis to ensure funds are spent the most effective way possible. Operating expenditures will be incurred and funded with the dollars raised to ensure all aspects of the program are run properly and efficiently.”

The Foundation says donations are tax-deductible and that it will provide donors with a tax receipt.

Donors will receive priority points

Similar to many NIL collectives, donors of the 12th Man+ Fund will receive benefits based on their level of giving. Because the 12th Man Foundation is the independent fundraising arm of Texas A&M’s athletic department, the 12th Man+ Fund allows donors to receive benefits that are typically tied to traditional donations for the athletic department, such as priority points that can impact seat selection or parking. Donors receive four points for every $100 contributed, but there are other ways to earn points, too.

There are also NIL-specific benefits to donating to the 12th Man+ Fund, such as an invitation to an “annual NIL event” and “annual NIL content.”

Texas A&M’s NIL FAQ posted online reminds fans and donors that “Texas’ NIL law precludes an institution from providing NIL compensation” and “Texas law generally prohibits the use of state resources for private gain.”

“We spent a lot of time studying this, asked a lot of questions, both independent of Texas A&M University and then ultimately informing Texas A&M University and working with them on the right way to approach it and make sure that it was compliant,” Dabney said.

Dabney said the process that led to the creation of the 12th Man+ Fund started last July. He said he didn’t consult with the NCAA, but noted “that conversation was housed with Texas A&M University.” Neither the SEC nor the NCAA has responded to a request from On3 for comment.

Despite the 12th Man Foundation’s stated purpose of “funding scholarships, programs and facilities in support of championship athletics at Texas A&M,” it’s technically an independent organization. As long as the relevant governing bodies have agreed, or do agree, that the 12th Man+ Fund follows applicable laws and rules, then it’s an organizational structure that other schools with independent fundraising organizations will surely evaluate, if not duplicate.

“In the end,” Dabney said, “we believe this fulfills our mission and we believe that it presents an opportunity for a competitive edge in a very competitive collegiate athletics space.”