Northwestern University Football Players Are Not Employees


Recently, the National Labor Relations Board ruled that grant-in-aid scholarship football players at Northwestern University are “employees” under the National Labor Relations Act. This has raised the question whether such players are now taxable on their scholarships.

In a letter from the Office of Chief Counsel to Senator Richard Burr, Treasury has indicated that they are not employees for federal tax purposes. The letter notes the NLRB decision does not control the “employee” character of the players for tax purposes – this is determined under the Internal Revenue Code.

Code Section 117 excludes qualified scholarship receipts from gross income. Citing to Revenue Ruling 77-263, the letter notes the longstanding position that athletic scholarships can qualify for exclusion under Section 117 when the student is expected to participate in a sport, the scholarship is not cancelled in the event the student cannot participate, and the student is not required to engage in any other activities in lieu of participating in the sport.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles (Chuck) Rubin, Gutter Chaves Josepher Rubin Forman Fleisher P.A. | Attorney Advertising

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