By Jonathan Nehring | Disclaimer

No matter where you stand on the issue, it’s apparent that things are going to be changing in the near future for the NCAA. 

On Friday, Judge U.S. District Judge Claudia Wilken officially published the latest blow to the status quo when she ruled in favor of O'Bannon and other plaintiffs by stating they should have been compensated by the NCAA for the likeness of their image.

While the O’Bannon lawsuit (or other legal actions against the NCAA) is far from over, NCAA athletes “playing” for free (or at least just tuition, room and board) appears to be over. Those athletes will no longer be “student athletes” but are now going to be paid employees for the services they provide their employers. 

With their new status as employees, these athletes will now learn not only what it is like to be a professional on the field, but will face a new challenge off the field – state income taxes.

As we have previously discussed, taxpayers owe state income taxes in each state they earn income. For athletes who are compensated for their services – that means every state in which those athletes play. Until now, this was a headache only for professional athletes and limited to the various 20 states or so that hosted professional sports teams. Now, every state’s income tax policy will become a sales pitch by college recruiters to high school athletes across the country.

So, without further ado, the effect state income tax laws will have on college athletes.

Using potential earning numbers for college athletes and applying those salary figures to the 2013 football and 2013-14 basketball schedules we calculated what a NCAA athlete would owe in state income taxes for each of the major football and basketball conferences’ schools. (Because last year's schedule was used, teams are assigned to the conference they were a member of during the 2013-14 seasons.)

For the next several days, we will put out a team by team breakdown for each conference. Today is an overview of what the average state income taxes owed will be per conference. This is just the average for the conference so, as you will see in the coming days, this may greatly overstate or understate what a team in that conference may owe. 

As can be seen by the graphics above, conferences that once appeared attractive to college athletes now may have to put some extra effort into their recruiting to convince a basketball player their school is worth $13,000 less in annual income or to convince a football player their conference provides enough benefits to outweigh paying double in state income taxes.

Be sure to check back throughout the week to see where each team ranks within their respective conference:

• Later Today: SEC (Football & Basketball)
  
• Tuesday: PAC 12 (Football & Basketball)
  
• Wednesday: Big Ten & Big 12 (Football & Basketball)
  
• Thursday: ACC & American (Football & Basketball)
  
• Friday: MWC & Big East (Basketball) 

(NOTE: Some have misinterpreted this article as an argument against college athletes being compensated for their services. Nothing could be farther from the truth.  Our intention is not to argue for or against college athletes being paid, that is an issue to be resolved by the courts.  This article is purely intended to explain the tax implications once athletes are allowed to be paid.)

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By Jonathan Nehring | Disclaimer

In the final segment of our series on how college athletes would be taxed should they become paid athletes, we look at solely the basketball programs for the Mountain West Conference and Big East Conference. 

The Mountain West Conference (MWC) is very similar to the Pac 12 not only in location but also in the effects they would incur should they pay their basketball stars. Similar to the Pac 12, there is a large disparity among the teams in the conference. Basketball players for San Jose State would make $34,014 less per year than their conference mates at UNLV. Aside from the Pac 12’s gap between Oregon and Washington State, this is the largest difference for state tax bills between conference mates in the entire NCAA.  

The large variations among the MWC is good news for UNLV as they have finished 3rd in the MWC for the past 5 years, usually trailing to either New Mexico or San Diego State. With Nevada’s lack of an income tax, paying MWC basketball players would greatly benefit UNLV as they would be able to offer their players $17,005 more annually than the Lobo’s and $33,518 more than the Aztecs. 

With the recent divorce that split the Big East basketball schools from their former conference mates with football programs, it appears the Big East came out on the wrong end of the deal. Many of their former football programs left for the American Conference which now holds the title as the NCAA conference with the smallest average state income tax bill ($10,049). Contrarily, the average basketball player in the Big East owes the second largest amount ($20,913) in state income tax of all NCAA basketball players. 

Within the conference, Villanova appears to be the greatest benefactor from the change to pay college athletes. Not only is the Wildcats state income bill of $11,688 the least in the Big East, but their stiffest competitors in the conference standings the past few years – Georgetown and Marquette – face the two largest state tax bills among the conference. Excluding the teams who left the Big East and those who just joined this past season, only the Georgetown and Marquette programs have averaged better conference standings than Villanova over the past five years. If college athletes were to get paid, Villanova’s program could likely exceed the Hoyas’ and Golden Eagles’ programs as they could offer their basketball athletes $13,364 and $18,908 more, respectively, than their inner conference foes.

While the $19,000 gap in net income between Villanova and Georgetown seems significant, the Big East is the NCAA conference with the least variation among conference teams. Whether this will make the Big East the most competitive conference is yet to be seen. 

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By Jonathan Nehring | Disclaimer

While this is not the last of this series' articles, it is the “least” of these articles. The American Conference may have happened upon becoming a power conference if college athletes are to be paid for their services. 

First, the American Conference will become the highest net income earners among college athletes as the athletes from the AAC’s average football and basketball program will earn, respectively, 32% and 38% more than the next closest NCAA conference will be able to pay their athletes. Second, half of the American Conference’s teams will fill a roster with football players who will not owe over $111 and basketball players not owing over $401 in state income taxes. In fact, 4 AAC football programs and 5 AAC basketball programs rank within the Top 10 lowest state income tax bills among all NCAA programs! This could entice other schools to join the AAC as the majority of their schedule would then be in tax friendly areas, thus helping the new school lower their own tax bill.

Taking a look at the teams inside the new “wonder conference”, the conference is split down the middle for “haves” and “have nots”. The football programs for the “haves” – teams residing in states without income taxes – would owe an average of $62 in annual state income tax while the “have nots” would owe an average of $8,403. 

Dividing the basketball program into the same dividing line, the “haves” would make $19,451 more annually than their “have nots” would. 

Interestingly from a tax perspective, the AAC Conference Tournament will move in 2015 from the FedEx Forum in Memphis to the XL Center in Hartford, Connecticut. This change will subject basketball players to a week of the highest tax rates possible for AAC teams instead of a state without an income tax. 

This large gap in earnings may be well needed relief for the AAC’s smaller basketball programs such as Larry Brown’s Mustangs, as they currently have to recruit against both the 2013 and 2014 NCAA Tournament Champions – the Louisville Cardinals and Connecticut Huskies. While UConn and Louisville currently dominate the AAC on the court, the “haves” could now offer potential AAC athletes $23,525 more than either of those programs could offer their basketball prospects. 

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By Jonathan Nehring | Disclaimer

The ACC could be titled as the “average conference” when looking at the conference’s average state income tax bills. 

The ACC’s football ($8,252) and basketball ($17,872) athletes would, on average, owe nearly identical what the average NCAA football ($7,333) or basketball ($17,339) athlete would owe in state income taxes.

The ACC could also be qualified as “average” within the league as 9 of the conferences team’s state tax bills vary by only 14% from the largest to the smallest of those 9 teams. Of the 5 football teams that do not belong in that “average” window, 2 of those teams – the Florida schools – boast Top 20 lowest state income tax bills for both their basketball and football athletes. 

This is not likely to be welcoming news to the ACC football foes as they must now recruit against not only Florida State’s 2014 BCS Championship Title but also against the fact that FSU can pay Jameis Winston and Co. thousands more in net annual income. 

While Florida State is the current leader in the ACC football world, paying college athletes may help FSU or Miami also take ACC basketball domination away from the North Carolina powerful trio of North Carolina, Wake Forest, and Duke. For the past 25 years, North Carolina, Wake Forest, or Duke have won 80% of the ACC basketball titles but with FSU or “the U” now able to offer their basketball athletes $20,000 more annually than the Carolina schools can, the ACC basketball dominant powers may soon be shifting. 

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By Jonathan Nehring | Disclaimer

Taking our second stop in the the Midwest for the day, we now turn to the Big 12. 

While the Big 12 suffered in the past two waves of conference realignment, they may now become a destination conference if college athletes are paid for their services. Aside from the American Conference, the Big 12 conference averages the lowest state income tax bill among NCAA conferences. Big 12 football and basketball players would owe 26% and 32% less, respectively in state income taxes than the average NCAA football or basketball player would owe. 

Although the Big 12 may enjoy the upper hand against other conference’s tax bills, competition for recruits within the conference will likely be fierce. 

Big 12 football has the second largest tax bill variance among their conference teams in comparison to all other NCAA conferences. This large variance is evidenced by the grouping of teams in the graphic above. Texas, which has no state income tax, hosts nearly half of the Big 12 football programs and makes out the lowest “group” of the Big 12 with an average tax bill of $85. The “middle class” of the Big 12 combines the Oklahoma and Kansas programs to bring about an average tax bill of $8,403. However, on the other end of the spectrum, Iowa State’s football players will be responsible for the 4th highest state income tax bill for the entire NCAA.

Big 12 basketball fans, especially in Texas, may find pleasure in the possibility that state income taxes will provide some teams a competitive edge over Kansas – the holder of 10 straight regular season conference titles. (Disclaimer: The writer of this post attended KU during 7 of those 10 years.) The Texas schools will be able to offer $16,809 more annually to their basketball stars than KU. For the author’s sanity sake, let’s hope the lure of passing UCLA’s record of 13 straight conference titles is worth more than $16,809.

Of all the programs within the Big 12, Iowa State would suffer the greatest blow from paying college athletes. Having never won the Big 12 football championship and last winning the Big 12 basketball regular season title in 2001, they would now also be forced to offer their athletes some of the lowest net income offers among the NCAA. 

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