Hate Taxes? Be Thankful You're Not a Pro Athlete

Cleveland taxes out-of-state players—even when they’re injured
Photograph by Getty Images

Former Chicago Bears linebacker Hunter Hillenmeyer was willing to pay his fair share of taxes to cities where he played. Cleveland, he says, got greedy. Hillenmeyer and former Indianapolis Colts center Jeff Saturday are suing the city in the Supreme Court of Ohio for refunds of $5,062 and $3,294, respectively. They say it’s not the sum that matters but the principle: Cleveland taxes all the athletes on a visiting team for every game, even players who are hurt or don’t attend. “Nobody likes paying taxes—that’s obvious—but they should be fair,” says Hillenmeyer, who retired in 2010 after eight years in the National Football League. “It was just such an egregious and shameless money grab by the city of Cleveland, it just felt wrong not to try to do anything about it.”

Twenty-one states and eight cities that are home to major professional sports teams—including Detroit, Kansas City, and Philadelphia—tax visiting players, coaches, trainers, and others who accompany the team, says Sean Packard, an accountant in Virginia who handles taxes for about 200 athletes. These income taxes, often based on players’ salaries and how often they play in the state, can be a major revenue source. California collected $163.8 million in 2011 from resident and nonresident professional athletes for MLB, the NBA, NHL, NFL, WNBA, golf, tennis, and soccer, according to the state Franchise Tax Board. About $151 million of that came from the top four sports, the board said. Pittsburgh took in $3.1 million from pro athletes in 2013. Not all states and cities break out tax revenue from players.

They're suing Cleveland in the Supreme Court of Ohio for unfair taxation. Click the image to see how other states and cities tax athletes.
Photographs by Getty Images

Athletes are attractive targets because they make billions in combined income, have no say in where they play, and aren’t exactly objects of public pity. The taxes became widespread after California used its income tax laws to extract money from players for the Chicago Bulls, who’d defeated the Los Angeles Lakers in the 1991 NBA championship, says Robert Raiola, an accountant in New Jersey who represents about 125 athletes. Illinois retaliated with its own taxes on out-of-state athletes in what became known as “Michael Jordan’s Revenge,” he says.

Although players can get credit in their home states for out-of-state taxes paid, they generally can’t get credit for taxes that cities make them pay, Packard says. Hillenmeyer and Saturday are challenging the way Cleveland assesses its tax, which they say is unfair. The city uses a games-played calculation that divides the number of games a team plays in the city by the number of games in a season. The players prefer a formula known as duty days. It divides the number of games played in the city by the number of days in a season, which means lower taxes per game.

Here’s how it works out: In 2006, Hillenmeyer’s salary was $3.2 million. Using its formula, the city of Cleveland calculated that his per-game taxable income was $162,002, according to papers Hillenmeyer filed with the Ohio Board of Tax Appeals. Under the more common duty-days calculation that other cities and states use, Hillenmeyer’s taxable income would have been $38,557, according to the filing.

Saturday’s complaint isn’t only that he had to pay Cleveland too much but that he shouldn’t have had to pay at all. A six-time Pro Bowl center, he played 13 years with the Colts and won a Super Bowl in 2007 before finishing his career with the Green Bay Packers in 2012. In 2008 he was injured and missed the Colts’ only game in Cleveland that year. He was still hit with a $3,294 tax, thanks to city regulations that count payments an employer makes to a sick and absent employee. “It just became a tipping point,” says Saturday, who retired last year and is an analyst for ESPN. “I didn’t want other guys to have to face the same thing.”

Hillenmeyer’s and Saturday’s protests spent years working their way up to the Ohio Supreme Court, which has agreed to hear the cases but hasn’t yet set a date. Cleveland city spokeswoman Maureen Harper declined to comment on the case. The city has said in filings that it has discretion as long as the tax is reasonable. The games-played formula is precise because athletes are paid to perform in games, the city has said.

States usually give visiting executives a little leeway before they have to start forking over local income taxes. Ohio law says nonresidents who work in a city for 12 or fewer days a year don’t have to pay anything. Sports stars and entertainers are specifically exempted from this grace period. And it’s no use for a linebacker or center fielder to try to slip in and out of the state unnoticed, says New Jersey CPA Raiola. “Athletes,” he says, “are high-profile, high-salary, and very easy to track.”

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