(a) In general

Section 3402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(u) Extension of withholding to certain payments to student athletes classified as not employees

(1) In general

For purposes of this chapter and so much of subtitle F as relates to this chapter, any name, image, and likeness payment to a student athlete shall be treated as if it were a payment of wages by an employer to an employee.

(2) Amount withheld

(A) In general

The amount to be deducted and withheld under this chapter from any payment to which paragraph (1) applies shall be an amount equal to 30 percent of the amount of such payment.

(B) Non-cash remuneration

In the case of remuneration other than cash, the amount to be withheld under this chapter shall be an amount equal to 30 percent of the fair market value of such remuneration on the date of transfer from the payor to the payee.

(3) Name, image, and likeness payment

The term name, image, and likeness payment means remuneration to a student athlete in cash, property, or services for the commercial use of such student’s name, image, or likeness.

(4) Definitions

For purposes of this subsection—

(A) Student athlete

The term student athlete means an individual who is enrolled as a full-time student at an institution and who—

(i)

makes satisfactory progress towards completing a degree, and

(ii)

participates in intercollegiate athletic competition or competes for a varsity sports team as part of the institution’s educational, developmental, or extracurricular programs.

(B) Institution

The term institution has the meaning given the term institution of higher education under section 101 of the Higher Education Act of 1965.

(5) Worker classification

Withholding under this subsection shall not be taken into account in determining whether the payor or payee of a name, image and likeness payment is an employee or an employer for purposes of this title.

(6) Exception

A payee may elect to have paragraph (1) not apply, and such election shall remain in effect until the taxpayer terminates such election.

(7) Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out this subsection.

(b) Waiver of underpayment penalty for new student athletes

Section 6654(e) of such Code is amended by adding at the end the following new paragraph:

(4) New student athletes

No addition to tax shall be imposed under subsection (a) with respect to any underpayment if the Secretary determines—

(A)

that the taxpayer is a student athlete with respect to whom section 3402(u) applies for the taxable year, and

(B)

that the addition to tax was not waived under this paragraph with respect to the taxpayer for any prior taxable year.

(c) Effective date

The amendment made by this section shall apply to payments made in taxable years beginning after December 31, 2027.

(a) In general

Not later than December 31, 2029, the Secretary shall report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the effects of the extension of withholding to payments to student athletes under section 3402(u) of the Internal Revenue Code of 1986 (as added by section 1), based on the most recent data that is available.

(b) Contents

The report described in subsection (a) shall include—

(c) Secretary

For purposes of this section, the term Secretary means the Secretary of the Treasury (or the Secretary’s delegate).