Last week, the United States Supreme Court declined to review the Ohio Supreme Court’s decision to strike down Cleveland’s “jock tax.” The Ohio Supreme Court previously agreed to suspend its decision while the city appealed, but now that the U.S. Supreme Court has denied certiorari, the city must begin to refund players millions.
Cleveland is one of eight cities that have implemented a so-called “jock tax,” which is an income tax levied on NFL players visiting the city for a road game. The decision to strike down the tax comes as a result of two lawsuits brought by former Indianapolis Colt Jeff Saturday and former Chicago Bear Hunter Hillenmeyer.
While the Ohio Supreme Court upheld the constitutionally of the income tax itself, it struck down the method Cleveland used to measure the tax. Cleveland used what is called a “games-played” method to determine the player’s taxable income. Under this method, a player’s taxable income is 1/20th of their total income, because one game is played in Cleveland out of the 20 games played during the season (and potential postseason).
The Ohio Supreme Court struck down the games-played method as a violation of the Due Process Clause, reasoning that a NFL’s player’s employment consists of more than just games played. Additionally, the court held that Cleveland may not levy the tax upon a player that is not present at the game, even if the player is on the team’s roster.
Now that the U.S. Supreme Court has denied review, the Ohio Supreme Court decision will cost Cleveland millions in tax refunds. Ryan Losi, executive vice president of a Virginia-based sports accounting firm, told Cleveland.com that visiting NFL players could receive up to $2.4 million in refunds. The NFL Players Association notified all active players of the decision and informed them how to seek a refund. Moreover, the City projects that it will lose more than $1 million each year in tax revenue because of the change in formula.