Taxable Talk

Pity the poor Cleveland Browns. Last Thursday they lost to the Cincinnati Bengals 31-10. This morning, the City of Cleveland lost at the US Supreme Court, 2-0. The Supreme Court refused, without comment, to hear Cleveland’s appeal of their “Jock Tax” after its taxation scheme was ruled unconstitutional by the Ohio Supreme Court.

Former NFL players Jeff Saturday and Hunter Hillenmeyer had filed separate challenges to the City of Cleveland’s “Jock Tax.” As I previously noted,

Mr. Saturday’s case was the more egregious of the two. During 2008 “More than 72,000 other souls attended the Colts’ dismal 10-6 victory over the Browns.” Mr. Saturday didn’t step foot in Cleveland; he was injured and attended physical rehabilitation in Indianapolis. Mr. Saturday contended that Cleveland has no authority to impose its tax on the income of a nonresident who did not work within Cleveland’s city limits during the taxable year.

Yes, Cleveland’s regulation held that a player who was on the roster but didn’t set foot in Cleveland owed the tax. The Ohio Supreme Court used common sense (and constitutional law) to sack Cleveland.

Hunter Hillenmeyer, the former linebacker with the Chicago Bears, actually set foot in Cleveland. He challenged how Cleveland calculated the tax. Every other jurisdiction uses a duty days method, but Cleveland used a games played method. Cleveland was penalized for that:

Hillenmeyer’s statements were corroborated by the affidavit testimony of Cliff Stein, senior director of football administration and general counsel for the Chicago Bears. Stein confirmed that under the NFL standard player contract and from the time that Hillenmeyer joined the Bears in 2003, he was required to “provide services to his employer from the beginning of the preseason through the end of the post-season, including mandatory mini-camps, official preseason [sic] training camp, meetings, practice sessions, and all preseason, regular season, and post-season games.” Stein also stated that “[t]he compensation Hillenmeyer receives from the Bears is paid for all of these services and not only for games played” and that “[f]ailure to comply with these contractual requirements would subject Hillenmeyer to termination pursuant to Paragraph 12 of his NFL Player Contract and/or fines under Article VIII of the Collective Bargaining Agreement.”

Many former (and current) NFL players will be filing refunds with the Central Collection Agency, the agency that administers the income tax for Cleveland. The statute of limitations is three years (from the due date), so 2012 – 2014 returns are open for refund claims. Cleveland will likely lose about $1 million in income annually because of the change and could lose another $2 million in refunds. Of course, they shouldn’t have had the unconstitutional scheme in the first place.

And yes, it is time to say “Wait ’til next year” if you’re a Browns fan.

Tags: jock.tax

This entry was posted on Monday, November 9th, 2015 at 2:49 pm and is filed under Ohio. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.