The Six Words That Could Cost College Athletes Everything — And the IRS Doesn't Care Either Way

When the SCORE Act 'declares athletes are not employees,' Congress is attempting to legislate an employment classification that the IRS and Department of Labor determine through facts and circumstances — not political fiat. This is the compliance trap hiding in plain sight. Under IRC §3121 and common-law worker classification standards, the economic reality of a relationship determines employee status — not what a statute calls it. Athletes receiving structured compensation, subject to institutional oversight, performing services on set schedules? That's an employment fact pattern, regardless of what Congress 'declares.' Now layer in §409A. If NIL compensation structures are designed with deferred elements — bonuses, milestone payments, multi-year deals — and the athlete is later reclassified by a court or the DOL as an employee, suddenly those arrangements face §409A scrutiny, triggering 20% penalty taxes plus interest on top of ordinary income rates. Furthermore, preempting state NIL laws doesn't preempt state labor boards. California's AB5 framework, for instance, operates independently of federal NIL legislation. Congress can *label* these athletes however it wants. The NLRB, IRS, and federal courts will apply their own tests. The question every athletic director and compliance officer needs answered before this passes: Who indemnifies the institution when the classification gets challenged?