NEW YORK, NY — With Super Bowl 50 approaching, whether players and team staff must pay state “jock tax” is a hot topic. Jock tax is a term coined about the idea that nonresident athletes who travel to a state for professional games, such as the Super Bowl, have to report earnings and pay state income tax for the days they were in that state. William L. Abrams, Founding Partner and tax attorney at Abrams Garfinkel Margolis Bergson, LLP, discusses how the Super Bowl is held in a different state each year so whether taxes are due are in the discretion of the host state.
This year the Super Bowl will be held in California, which has a state income tax. It is estimated that California takes in more than $100 million from visiting athletes annually. The state income tax is calculated by looking at duty days, which are “any day[s] services are performed under the contract from the beginning of an official preseason activity until the last game played, including the Super Bowl.” California has set up a Sports Program to ensure that nonresident athletes calculate their income tax properly. Athletes must file multiple tax returns, however many states have reciprocity agreements, so they do not have to pay tax on the same income more than once.
The three main states involved in the Super Bowl this year are California, North Carolina, and Colorado. California’s highest tax bracket is 13.3% for an income of $1 million or more. California does not have a specific agreement regarding reciprocal taxation, but residents of Arizona, Guam, Indiana, Oregon, and Virginia are able to use home-state credits towards their California tax liability. Regarding North Carolina’s income tax, it is a flat tax on all income brackets at a rate of 5.75 percent. North Carolina has no reciprocal agreements with other states. Lastly, Colorado has a flat tax as well, currently 4.63 percent. Colorado residents do not have to pay income tax to Colorado on income that is earned and withheld in a different state.
Winning Super Bowl players receive $97,000 and the losing team players receive $49,000. As an example, even though it would be calculated as duty days, at its highest tax bracket, California will collect approximately $12,901 on the $97,000 winning payoff, and $6517 on the losing $49,000 payoff. If compared to North Carolina’s tax rate, the state income tax would be $5,577.50 and $2,817.50, respectively. Colorado’s tax rate is even lower, and would amount to owed taxes of $4,491.10 for the winning payoff and $2,268.70 for the losing payoff.