On June 14, 2021, Texas passed a Name, Image, Likeness (NIL) law for their colleges and institutions. Senate Bill 1385, signed by Governor Greg Abbott, took effect on July 1, 2021 allowing intercollegiate student athletes to receive compensation for the use of their NIL in the State of Texas. In addition to SB 1385, Texas House Bill 2804 was passed on June 10, 2023 to provide clarity to the existing legislation and took effect on July 1, 2023.
Bill
Status
Signed Into Law
Effective
Date
07/01/2021
NCAA
Institutions
53
Estimated
NCAA Athletes
15,900
High School
NIL Legislation
No
Last Updated 08/22/22
House Bill 2804:
AN ACT relating to the compensation and professional representation of student athletes participating in intercollegiate athletic programs at an institution of higher education.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 51.9246, Education Code, is amended by adding Subsections (a-1), (c-1), (g-1), (g-2), (l), (m), (n), (o), and (p) and amending Subsections (g) and (i) to read as follows:
(a-1) For purposes of this section, official team activities of an intercollegiate athletic program at an institution to which this section applies include any activity the institution designates as an official team activity.
(c-1) An athletic association, an athletic conference, or any other group or organization with authority over an intercollegiate athletic program at an institution to which this section applies may not enforce a contract term, a rule, a regulation, a standard, or any other requirement that prohibits the institution from participating in intercollegiate athletics or otherwise penalizes the institution or the institution’s intercollegiate athletic program for performing, participating in, or allowing an activity required or authorized by this section.
(g) A student athlete participating in an intercollegiate athletic program at an institution to which this section applies:
(1) shall, before entering into the contract, disclose to the institution, in the manner prescribed by the institution, any proposed contract the student athlete may sign for use of the student athlete’s name, image, or likeness;
(2) may not enter into a contract for the use of the student athlete’s name, image, or likeness if:
(A) any provision of the contract conflicts with a provision of the student athlete’s team contract, a provision of an institutional contract of the institution, a policy of the athletic department of the institution, or a provision of the honor code of the institution;
(B) the compensation for the use of the student athlete’s name, image, or likeness is provided:
(i) in exchange for athletic performance or accepting an offer of admission to attend the institution;
(ii) by the institution;
(iii) in exchange for an act that occurs while the athlete is engaged in an official team activity; or
(iv) in exchange for an endorsement of alcohol, tobacco products, e-cigarettes or any other type of nicotine delivery device, anabolic steroids, sports betting, casino gambling, a firearm the student athlete cannot legally purchase, or a sexually oriented business as defined in Section 243.002, Local Government Code; or
(C) the duration of the contract extends beyond the student athlete’s participation in the intercollegiate athletic program;
(3) is not considered an employee of the institution based on the student athlete’s participation in the intercollegiate athletic program;
(4) may earn compensation from selling the student athlete’s autograph in a manner that does not otherwise conflict with a provision of this section; and
(5) May not use an institution’s facility, uniform, registered trademark, copyright-protected product, or official logo, mark, or other indicia in connection with a contract for the use of the student athlete’s name, image, or likeness unless the student athlete obtains the institution’s express permission.
(g-1) The following activities do not constitute compensation provided by an institution to which this section applies under Subsection (g)(2)(B)(ii):
(1) An activity authorized under subsection (m); or
(2) Recognition by an institution to which this section applies of a third-party entity that compensates a student athletes for the use of the student athlete’s name, image, or likeness, or the entity’s donors, including the institution’s provision of priority status or other items of de minimis value equivalent to status or items the institution provides to the institution’s donors.
(g-2) An institution may not authorize a use described by Subsection (g)(5) unless the institution requires that:
(1) The student athlete and the person contracting for the use of the student athlete’s name, image, or likeness comply with any requirements the institution establishes, including requirements related to licensing; and
(2) The institution is compensated for the use in an amount consistent with market rates.
(i) An institution to which this section applies shall require a student athlete participating in an intercollegiate athletic program at the institution to attend a financial literacy and life skills course during the student’s first academic year at the institution. The course must be at least five hours in duration and include information on financial aid, debt management, time management, budgeting, and academic resources available to the student athlete. The institution may not during the course allow any provider of financial products or services to:
(1) market, advertise, or refer the provider’s services to a student athlete; or
(2) solicit a student athlete to use the provider’s services.
(l) Information written, produced, collected, assembled, or maintained by an institution to which this section applies that includes or reveals any term of a contract or proposed contract for the use of the student athlete’s name, image, or likeness is confidential and excepted from required public disclosure in accordance with Chapter 552, Government Code. An institution to which this section applies may withhold information described by this subsection without requesting a decision from the attorney general under Subchapter G, Chapter 552, Government Code.
(m) An institution to which this section applies or third-party entity acting on the institution’s behalf, or employee of the institution or third-party entity:
(1) May identify, create, facilitate, or otherwise assist with opportunities for a currently enrolled student athlete to earn compensation from a third party for the use of the student athlete’s name, image, or likeness; and
(2) May not, in assisting a student athlete as described by Subdivision (1):
(A) Act as an athlete agent for the student athlete;
(B) Be compensated by the student athlete or third party for providing the assistance;
(C) Attempt to influence the student athlete’s choice of professional representation in connection with an opportunity; or
(D) Attempt to diminish the student athlete’s opportunities from competing third parties.
(n) A charitable organization exempt from taxation under Section 501(a), Internal Revenue Code of 1986, as an organization described by Section 501(c)(3) of that code, may compensate a student athlete from the use of the student athlete’s name, image, or likeness.
(o) An activity of a third-party entity that compensates a student athlete for the use of the student athlete’s name, image, or likeness may not be construed as an act on behalf of an institution to which this section applies, provided that:
(1) The entity is a separate legal entity from the institution; and
(2) The institution does not own or control the entity
(p) This section may not be construed as creating a cause of action against an institution or an institution’s officers or employees relating to a student athlete’s name, image, or likeness.
SECTION 2. (a) Except as provided by Subsection (b) of this section, the changes in law made by this Act apply only to a contract for the use of a student athlete’s name, image, or likeness entered into on or after the effective date of this Act. A contract for the use of a student athlete’s name, image, or likeness entered into before the effective date of this Act is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for that purpose.
(b) Section 51.9246(l), Education Code, as added by this Act, applies only to a request for information received on or after the effective date of this Act. A request for information received before the effective date of this Act is governed by the law in effect on the date the request was received, and the former law is continued in effect for that purpose.
SECTION 3. This Act takes effect July 1, 2023, if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for effect on that date, this Act takes effect September 1, 2023.
Senate Bill 1385:
AN ACT relating to the compensation and professional representation of student athletes participating in intercollegiate athletic programs at certain institutions of higher education.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The legislature finds and declares the following:
(1) intercollegiate athletics are an essential part of the fabric of this state;
(2) the competitive integrity of intercollegiate athletics is of vital importance;
(3) the United States Congress has failed to act to provide uniform guidance to the states on the matter of intercollegiate athletes receiving compensation in exchange for the use of the athlete’s name, image, or likeness; and
(4) the United States Congress must act on this matter to ensure the competitive integrity of intercollegiate athletics.
SECTION 2. Subchapter Z, Chapter 51, Education Code, is amended by adding Section 51.9246 to read as follows:
Sec. 51.9246. COMPENSATION AND PROFESSIONAL REPRESENTATION OF STUDENT ATHLETES PARTICIPATING IN INTERCOLLEGIATE ATHLETIC PROGRAMS. (a) In this section:
(1) “Athlete agent” has the meaning assigned by Section 2051.001, Occupations Code.
(2) “General academic teaching institution” and “private or independent institution of higher education” have the meanings assigned by Section 61.003.
(3) “Honor code” means a set of rules or principles governing an academic community to which a student agrees to abide when attending an institution to which this section applies.
(4) “Institutional contract” means a contract between an institution to which this section applies or its designated representative and an external party that includes a sponsorship agreement governing the use of the institution’s trademarks in connection with athletics.
(5) “Team contract” means a contract between a student athlete and an institution to which this section applies and includes any rules or expectations of the institution’s athletic department or head coach that require a student athlete’s compliance as a condition under the contract of participation as a member of the intercollegiate athletic program.
(b) This section applies only to:
(1) a general academic teaching institution; or
(2) a private or independent institution of higher education.
(c) An institution to which this section applies may not:
(1) adopt or enforce a policy, requirement, standard, or limitation that prohibits or otherwise prevents a student athlete participating in an intercollegiate athletic program at the institution from:
(A) earning compensation for the use of the student athlete’s name, image, or likeness when the student athlete is not engaged in official team activities, as that term is defined by the institution; or
(B) obtaining professional representation, including representation by an attorney licensed to practice law in this state, for contracts or other legal matters relating to the use of the student athlete’s name, image, or likeness; or
(2) provide or solicit a prospective student athlete of an intercollegiate athletic program at the institution with compensation in relation to the prospective student athlete’s name, image, or likeness.
(d) A scholarship, grant, or similar financial assistance awarded to a student athlete by an institution to which this section applies that covers the student athlete’s cost of attendance at the institution is not compensation for purposes of this section.
(e) A student athlete participating in an intercollegiate athletic program at an institution to which this section applies may not be disqualified from eligibility for a scholarship, grant, or similar financial assistance awarded by the institution because the student athlete:
(1) earns compensation from the use of the student athlete’s name, image, or likeness when the student athlete is not engaged in official team activities; or
(2) obtains professional representation, including representation by an attorney licensed to practice law in this state, for contracts or other legal matters relating to use of the student athlete’s name, image, or likeness.
(f) An institution to which this section applies may not prescribe a team contract for an intercollegiate athletic program that prohibits or otherwise prevents a student athlete from using the student athlete’s name, image, or likeness for a commercial purpose when the student athlete is not engaged in official team activities.
(g) A student athlete participating in an intercollegiate athletic program at an institution to which this section applies:
(1) shall, before entering into the contract, disclose to the institution, in the manner prescribed by the institution, any proposed contract the student athlete may sign for use of the student athlete’s name, image, or likeness;
(2) may not enter into a contract for the use of the student athlete’s name, image, or likeness if:
(A) any provision of the contract conflicts with a provision of the student athlete’s team contract, a provision of an institutional contract of the institution, a policy of the athletic department of the institution, or a provision of the honor code of the institution;
(B) the compensation for the use of the student athlete’s name, image, or likeness is provided:
(i) in exchange for athletic performance or attendance at the institution;
(ii) by the institution;
(iii) in exchange for property owned by the institution or for providing an endorsement while using intellectual property or other property owned by the institution; or
(iv) in exchange for an endorsement of alcohol, tobacco products, e-cigarettes or any other type of nicotine delivery device, anabolic steroids, sports betting, casino gambling, a firearm the student athlete cannot legally purchase, or a sexually oriented business as defined in Section 243.002, Local Government Code; or
(C) the duration of the contract extends beyond the student athlete’s participation in the intercollegiate athletic program;
(3) is not considered an employee of the institution based on the student athlete’s participation in the intercollegiate athletic program; and
(4) may earn compensation from selling the student athlete’s autograph in a manner that does not otherwise conflict with a provision of this section.
(h) An institution to which this section applies that identifies a provision in a contract disclosed to the institution by a student athlete under Subsection (g)(1) that conflicts with a provision in the student athlete’s team contract, a provision of an institutional contract of the institution, a policy of the athletic department of the institution, or a provision of the honor code of the institution shall promptly disclose the conflict to the student athlete or the student athlete’s representative, if applicable. The student athlete or the student athlete’s representative is responsible for resolving the conflict not later than the 10th day after the date of the disclosure.
(i) An institution to which this section applies shall require a student athlete participating in an intercollegiate athletic program at the institution to attend a financial literacy and life skills workshop at the beginning of the student’s first and third academic years at the institution. The workshop must be at least five hours in duration and include information on financial aid, debt management, time management, budgeting, and academic resources available to the student athlete. The institution may not during the workshop allow any provider of financial products or services to:
(1) market, advertise, or refer the provider’s services to a student athlete; or
(2) solicit a student athlete to use the provider’s services.
(j) No individual, corporate entity, or other organization may:
(1) enter into any arrangement with a prospective student athlete relating to the prospective student athlete’s name, image, or likeness prior to their enrollment in an institution of higher education; or
(2) use inducements of future name, image, and likeness compensation arrangement to recruit a prospective student athlete to any institution of higher education.
(k) Nothing in this section may be construed as permitting an athlete agent to take any action prohibited under Section 2051.351, Occupations Code.
SECTION 3. Section 51.9246(f), Education Code, as added by this Act, applies only to a contract entered into, modified, or renewed on or after the effective date of this Act.
SECTION 4. This Act takes effect July 1, 2021, if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary to take effect July 1, 2021, this Act takes effect September 1, 2021.
Now that Student-Athletes have the ability to profit off of their name, image and likeness, they must remain conscious about certain thresholds that could have certain tax consequences. Specific to the State of Texas:
The Texas NIL Law relates to the compensation and professional representation of student athletes participating in intercollegiate athletic programs at certain institutions of higher education.
Texas NIL started on July 1, 2021, per the NCAA Interim Policies and with the passage of Senate Bill 1385, Texas State NIL laws also took effect on July 1, 2021.
Texas NCAA Student-Athletes will be able to earn compensation for the use of her or his name, image, or likeness (NIL) through a multitude of different opportunities. Student-Athletes can now make money for things such as endorsements, sponsorships, appearances, autographs, memorabilia, podcasts, camps, clinics, private lessons, crowdfunding, and many other opportunities!
Both athletes and administrators in the State of Texas should start by making sure they have a proper understanding of the rules and regulations set-forth by Senate Bill 1385. A working-knowledge of the ‘Dos and Don’ts’ for Texas NIL will allow all parties to safely and successfully navigate the new landscape. The next most important aspect would be the compliance component of NIL. Not only do students need to make sure they are entering agreements that are compliant with the passed state regulations, but they need to make sure they are transparent with their school to avoid any institutional conflicts.
All institutions with NCAA athletic programs are affected by NIL. In the state of Texas, the following schools will be affected:
D3
NJCAA
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