Last week, we reported that the NHL Players’ Association, MLB Players’ Association, and NFL Players’ Association sued the city of Pittsburgh for charging a fee on nonresident professional athletes that play within the city. These fees, often referred to as jock taxes, have come under fire over the past few years.
The players’ associations are not challenging the legality of jock taxes in general, about which you can continue reading here. It is well established that states and municipalities have the right to tax income earned by athletes in their jurisdiction. Such taxes are commonplace in most states and some municipalities.
What is being challenged, however, is how these jock taxes are being applied. Pittsburgh is being sued because their tax laws exempt players who live in Pittsburgh, which the players’ associations claim violates the Pennsylvania Constitution’s requirement for uniformity in taxes as well as the United States Constitution’s dormant commerce clause. Pittsburgh is likely to counter by arguing that its jock tax is actually a license or usage fee, making it exempt from state constitutional requirements.
In addition to these constitutional concerns, the players’ associations also are challenging how such jock taxes are calculated. The most common method is the “duty days” method, where the number of days worked in a jurisdiction is divided by the total number of duty days in a season, and then multiplied by the player’s salary. This method includes games, practices, and workouts. Pittsburgh, however, charges baseball and hockey players based on the “games played” method, in which the number of games played in the jurisdiction is divided by the total number of games played. The players’ associations allege that the latter method results in players owing more in taxes than they should.
Another core issue surrounding these jock taxes is how they single out professional athletes. According to tax attorney Jason Feingertz, the players’ associations find Pittsburgh’s fee to be unfair since other nonresident professionals do not pay such a fee. These associations ultimately prefer a method where all professionals are taxed using the same method.
As we reported earlier, players’ associations have successfully challenged similar jock taxes in Ohio and Tennessee. The Ohio Supreme Court ruled that the games played method violated the Due Process Clause of the U.S. Constitution, a holding that was left undisturbed by the U.S. Supreme Court. Meanwhile, Tennessee reached a $3.3 million settlement with the NHLPA in which NHL players would be repaid.
There is also pending legislation that could potentially touch upon this issue. The U.S. Senate is currently considering the Mobile Workforce State Income Tax Simplification Act. This bipartisan bill would prohibit states from imposing an income tax on nonresidents who work 30 or fewer calendar days in the jurisdiction within a given year. However, the current version of the bill contains an exemption for professional athletes and entertainers, making it less likely that this proposed legislation will impact jock taxes.
We will continue to monitor this issue.