Clevelands Curious Tax Grab ‘The Jock Tax’ is the colloquial term used to describe how professional athletes are taxed in every jurisdiction in which they play. The word ‘play’ is operative here. Athletes who don’t travel with the team to a specific state or city, due to injuries or other reasons, are often able to avoid being taxed in those jurisdictions. If they were not physically present in the city or state then they did not technically earn income in that jurisdiction. However, some states or cities levy tax on all players of the visiting team, even those who did not travel with the team. This is the case for former Chicago Bears linebacker Hunter Hillenmeyer and former Indianapolis Colts center Jeff Saturday. Both players are currently suing the city of Cleveland in the Supreme Court of Ohio on the grounds of unfair taxation. Cleveland is just one example of a city that taxes all athletes on a visiting team for every game, even players who are hurt or do not attend. Further, Cleveland also uses the games played method for pro-rating salary and assessing tax, which leads to higher tax bills than the player-preferred duty days method. The latter method has a larger denominator since there are more days in a season than the number of games played. In a typical week, a team may spend five non-game days in its home state and the other two in the road state. Under the duty days method that calculates out to 2/7 of the weekly salary; the games played method would essentially consider the entire week to be taxable to the road jurisdiction. These two players are challenging not only the calculation of the tax assessed but the constitutionality of being taxed when they weren’t even there. Cleveland has held firm that players are paid to perform in games and the games played method is reasonable. It will be very interesting to see how this plays out in Ohio’s Supreme Court. Dates have not yet been set but the protests have been years in the making. The taxation of professional athletes is constantly evolving as players have to deal with a wide array of states and cities each year which don’t always operate under a standardized procedure. Please contact Wouch, Maloney & Co, LLP with questions relating to athlete taxation or other multi-state tax issues.
Posted on: Wed, 23 Jul 2014 14:40:08 +0000
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