NFL Players Association Prevails On Jock Tax Claims In Cleveland

Sunday, January 17, 2016 - 19:21

January 05, 2016

After a showdown with the City of Cleveland, former NFL players Hunter Hillenmeyer (Chicago Bears) and Jeffrey Saturday (Indianapolis Colts) were victorious last April when the Ohio Supreme Court ruled in favor of the players represented by the NFL Players Association (NFLPA) regarding the methodology of how Cleveland taxes nonresident professional athletes.

Before this challenge, Cleveland had been imposing a special jock tax on visiting athletes.  The tax was assessed based on the number of games played each year. Ohio’s highest court decided that Cleveland’s method of allocating the income of professional athletes violates the players’ due process rights under the Due Process Clause of the Fourteenth Amendment.  This decision now compels Cleveland to calculate the nonresident tax based on the number of days each visiting athlete works during the entire year (a duty-day formula), which is a taxation method used by many other states and municipalities.

An effort by Cleveland was made to the United States Supreme Court last August to stay the Court’s judgment allowing the players to file refund claims together with interest as appropriate on the basis of duty-days.  On November 9, the Supreme Court refused to hear Cleveland’s appeal paving the way for the NFLPA to recently issue memos to NFL Players, Agents and Financial Advisors regarding guidance on how to file an Application for Refund for overpayment of taxes in 2012 with the City of Cleveland.

Advisors for all eligible NFL Players (who were members of 2012 visiting NFL teams including the Bengals, Bears, Bills, Chargers, Chiefs, Eagles, Ravens, Redskins, and Steelers) are scrambling to submit such refund claims for 2012 before the due date of January 20, 2016.  Refund claims for eligible players who traveled to Cleveland during 2013, 2014 and 2015 are not as time sensitive and can be filed in accordance with the prevailing statute of limitations.

According to Evan Waxman, a Director in the EisnerAmper Personal Wealth Advisory practice, and an expert on the jock tax, a representative NFL Refund Claim could look like this:

Annual salary – $5,000,000 

  • The Cleveland Games Played Method – 20 (Includes 16 regular seasons games plus 4 pre-season); assuming no playoffs
    Games Played computation: ($5,000,000 x 1/20) = $250,000 x 2% = $5,000
  • The Duty-Days Method – 165 (Includes games played, practices, training, strategy sessions, and promo caravans)
    Duty-Days computation: ($5,000,000 x 1/165) = $30,303 x 2% = $606

Projected refund claim (based on above assumptions) = $4,394 ($5,000 - $606) 

City of Cleveland refund claims should be considered by all professional athletes, in any professional sports league, not just the NFL.  Eligibility should be discussed with a tax advisor to explore particular facts and circumstances to determine whether or not it makes sense to file a claim.  Situations differ and it may make sense not to file a claim after considering professional fees and the reduction in resident tax credits. Players domiciled in states that do not assess an income tax (Florida, Nevada, New Hampshire, Texas, Washington and others) are prime candidates for this initiative and will not be affected by any offsetting resident credit.