A new concern has arisen due to the recent ruling from the Chicago ruling of the National Labor Relations Board. It concerned football players from Northwestern University, ruled them as employees and granted them the right to unionize.
The problem arises with the new designation as employee. In the past, athletic scholarship were generally tax free. However, now that the scholarship is conditioned upon providing services (which it probably always was), and the student is labeled an employee, the scholarship is taxable income.
So this ruling could potentially make all athletic scholarships taxable.
Another consideration will be once this gets extended beyond Northwestern football players. If football players have the right to unionize, why wouldn’t any other college player receiving an athletic scholarship have the same right? Will volleyball players, baseball players, basketball or track and field athletes vote to unionize? Are they employees even if they don’t unionize?
The National Labor Relations Board has opened up a proverbial “can of worms”. If you or your dependent is receiving a college athletic scholarship, beware that though it is a wonderful benefit, it could be a taxable one.