Posts Tagged ‘nfl’

A new chapter was added to the ongoing dispute as to whether student athletes should be compensated for (i) the part they play in helping their respective schools generate millions of dollars in revenue from ticket sales and the use of their individual player likenesses, and (ii) the predominant amount of time that is spent as an athlete as opposed to a student.  It is a deeper issue than simply framing it as “pay for play”, but that discussion is one for another day …

What is important for our purposes is that the National Labor Relations Board (“NLRB” or the “Board”) recently ruled Northwestern University’s scholarship football players (differentiated from walk-on players) are “employees” under the National Labor Relations Act (the “Act”), and as such, have the right to unionize for collective bargaining purposes.

The Board’s ruling will be appealed, so the practical application of this unionization right and the resulting sub-issues from the decision will be delayed as of this writing.  However, there are theoretical tax matters that will play a part in the debate, and that could emerge if student-athletes are in-fact deemed “employees”.  Furthermore, the reasoning that the NLRB used to reach its conclusion that student-athletes are “employees” may also be the basis for which student-athletes would be taxed.

Without going into extensive detail, the NLRB determined that the Northwestern football players receive the substantial economic benefit of a scholarship in exchange for performing football-related services, under what amounts to be a contract-for-hire.  Additionally, the Board made note of the extensive amount of control that the football coaching staff and University have over the players, and that if team rules are broken, scholarships can be revoked:

  • NCAA rules prohibit players from receiving additional compensation or otherwise profit from their athletic ability and/or reputation, so scholarship players are dependent on their scholarships to pay for basic necessitates, including food and shelter;
  • Players devote 40-60 hours per week for football, depending on whether it is in-season versus the off-season, despite the NCAA’s prescribed limitation of 20 hours per week once the academic  year begins;
  • Coaches control living arrangements, outside employment, the ability to drive personal vehicles, travel arrangements off-campus, social media, use of alcohol or drugs, and gambling;
  • Players also are sometimes unable to take courses in certain academic quarters because they conflict with scheduled team practices.

At this point it is not entirely clear what student-athletes would be taxed on because if the decision is ultimately affirmed, there could be conflicting definitions and concepts in the tax code with respect to “gross income”, “compensation for services” and “qualified scholarships.”

For income tax purposes, “gross income” means all income from whatever source it is derived, and this includes compensation for services.  Until now student-athletes have not been considered employees, which is essentially why their scholarship (or parts of) have not previously been taxed.  But the NLRB went to great lengths to detail how the Northwestern football players currently receive compensation for playing football (the reason it saw fit to classify them as employees).  On that same basis, the IRS would likely take the position that the granted scholarships are compensation for services, and are thus taxable income to the student-athletes.  Whether the current statutory language would have to be amended or exclusions would have to be created to properly allow for this taxation is a secondary issue.

Yet there are other benefits the Northwestern football players have cited which they feel would outweigh the negative impact of taxes they might incur.  If the decision is upheld, players might be able to qualify for workers’ compensation benefits as a result of injuries suffered on the field.  Moreover, instead of coaches having unilateral control over the schedules and rules players must abide by at the risk of losing scholarships, the union the players could form would bargain with the university over “working conditions”.  This would be similar to the way in which the NFL and MLB players’ unions bargain for benefits of their respective players.

However, rights that are bargained for by this theoretical union could lead to further questions for the university.  For example, if players successfully bargained for health benefits, Title IX (which demands equal treatment of male and female athletes) might require equivalent benefits to all of the other athletic programs on campus.  Conversely, bargained-for benefits such as safer football helmets or equipment would not necessitate comparable action on the part of the school.

The NLRB ruling in the Northwestern case is restricted to private universities, meaning efforts by student-athletes of state schools would be governed by each state’s laws on unions of public employees.  However, this decision is an initial step in what will be a lengthy process that ultimately could re-shape the National Collegiate Athletics Association (“NCAA”) … and tax issues will most certainly have a substantial impact along the way.

CJ Stroh, Esq.

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Are you a sports fan? No…no…I know you like sports; that’s evidenced by the fact that you’re wearing a Kobe Bryant jersey despite clearly being in your late 30s. But do you really know sports?

Perhaps we should enlist a quantitative approach to separate the fans from the frauds. If you’re feeling confident, below is a quiz carefully designed to gauge your general sports knowledge.  Best of luck.

1. Michael Vick is best known for:

a. leading a marginally talented Atlanta Falcons team to the 2004 NFC Championship game

b. serving prison time for operating a viciously inhumane dog fighting ring

c. becoming  the first African-American quarterback to be drafted with the #1 overall pick

d. seeking treatment for a particularly persistent STD under the alias “Ron Mexico”

Answer: d. While a through c were quite notable on their own, none of them gave rise to the 21st century’s greatest invention: the Ron Mexico name generator.

 2. Math question: Please show all work. If Tiger Woods wins 72 PGA tour events, 14 Major Championships, and spends 545 weeks as the #1 ranked player in golf while sleeping with 11 different women outside of marriage,  what will his divorce settlement cost him?

 a. $110,000,000

b. a lifetime supply of Gatorade Performance Series Protein Recovery shakes

c.  three green jackets

d.  his worldwide reputation

Answer:  a. While d. might appear to be the correct answer, his previous rampant infidelity will be forgiven the minute he wins another Major and America heralds him for his “comeback.”

3. The 2011 NBA lockout ended after:

a. 30 days

b. 3 days

c. the lockout ended?

d. 149 days

Answer: c. The NBA is unwatchable.

4. Which of the following statements is false:

a. NY Jets’ cornerback Antonio Cromartie has fathered nine kids with eight different women

b. “Who should I start at wide receiver this week?” has replaced “Why are we here?” as mankind’s leading question for God

c. 2011 NL MVP Ryan Braun is currently serving a 50-game suspension for steroid use

d. While you were taking this quiz, Antonio Cromartie fathered yet another child with yet another woman

Answer: d. but only on a technicality!

5. Tim Tebow is most accurately described as:

 a. a devout Christian

 b. a lovely young man and solid role model  

 c. a below-average NFL quarterback 

 d. all of the above

Answer: d. Kudos to you for understanding that a, b, and c are not mutually exclusive options. You can be both a great person and an awful passer of the football.

Did you score a 20% or better? CONGRATULATIONS! You’re the type of guy or gal Deadspin had in mind when they published A Guide For Sports Fans (And Would-Be Plutocrats) To Doing Your Taxes.

That’s right; Deadspin — the once underground, now-mainstream sports blog that brought the world Ron Mexico, Chris Berman’s preferred pick-up line, and Brett Favre’s alleged text message seduction of Jenn Sterger — has now delved into the world of tax law.

Some highlights include:

Your bookie probably won’t give you a W-2G
For those of you who enjoy sporting events more when you’ve placed hasty wagers on the games, gambling is an important part of your tax return. “What? You mean my hot streak of victories guided by betting against Mark Sanchez that paid for my new 106-inch projector television is related to my taxes?” Yep! And it doesn’t matter if your bookie doesn’t give you a W-2G (don’t bother asking for one); those winnings are taxable.

You can deduct those personal seat license fees Alma Mater is chiseling out of you
What about tickets for your alma mater or favorite college sports team? Well, this is a tricky one, so read carefully. Under Publication 526 for 2011, if you donate money to the school and that donation gives you the right to purchase tickets to an athletic event, you can deduct 80 percent of the donation. If you are simply shelling out money for tickets, then that does not qualify as a charitable contribution.

Violent rec sports can be good for your tax return
Start playing in your hockey rec league again or some other high-collision, injury-rich sport. Medical and dental expenses are deductible but are subject to a 7.5 percent floor of your adjusted gross income. What does that mean? You need to play hard.
Really hard.

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In a move made popular by so many retirees tired of the rat race, Rutgers University football coach Greg Schiano is fleeing the Garden State for the palm trees and sandy beaches of Florida. Schiano is not heading south to live out his days playing shuffleboard and poaching the early-bird specials, however. To the contrary, he just accepted a 5-year contract to coach the NFL’s Tampa Bay Buccaneers.

Schiano leaves New Jersey as the State’s highest paid public employee, with an annual salary approaching $2,400,000. Now, Schiano’s salary with the Bucs is yet to be disclosed, but even if it doesn’t represent a raise from his annual Rutgers wage, Schiano stands to put an additional $175,000 a year in his pocket each year. How can I know this?

Tax rates, of course.

Schiano is leaving New Jersey, a state with a top personal tax rate of 8.97%, for Florida, which has no personal income tax. So assuming Schiano was raking in a total of $3,000,000 per year at Rutgers[i] and continues to do so as coach of Tampa Bay, by shifting his domicile to Florida, he stands to save $173,307 per year in state income tax.[ii]

Clearly, the Buccaneers have some attractive assets — most notably, a young, highly regarded QB Josh Freeman, a talented defensive line rotation and a dynamic wide-out Mike Williams —  that would appeal to any coach. But from Schiano’s perspective, saving 8.97% a year in taxes may be the sweetest plum of all.

[i] Given the high price he could command for running camps, speaking engagements, etc… additional income of $600,000 per year is probably a reasonable estimate

[ii] after accounting for the federal benefit for the state taxes paid to New Jersey.

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It’s been a rough year for NFL quarterback Kyle Orton.

First, he lost his job as the starting QB of the Denver Broncos to Tim Tebow, who promptly captivated the nation by leading the Broncos back to relevancy despite a glaring inability to throw a forward pass with any semblance of accuracy.  As if that weren’t insult enough, Orton was subsequently granted his outright release, while Tebow’s flair for the dramatic and outspoken Christian faith have led some lunatics observers to hint at divine intervention.  

Then, Orton and his unceremonious ouster from Denver were lampooned in this piece of internet awesomeness: 

After his release, Orton was claimed off waivers by the lowly Kansas City Chiefs before he could be reunited with his former team, the Chicago Bears, who at the time were 7-3 and one serviceable QB away from a playoff berth.

Then last week, just days before Orton was set to lead the Chiefs into Denver with hopes of keeping the Broncos out of the playoffs, Orton sued a Chicago law firm alleging he and other investors suffered millions of dollars of losses from partnerships that failed to provide anticipated tax benefits:

Orton, in a complaint filed yesterday in state court in Chicago, accuses Chuhak & Tecson PC of misrepresentation and negligence over advice on investments in oil and gas partnerships that were designed to grant tax credits. He and a co-plaintiff seek to represent other investors in a class-action lawsuit. The firm didn’t warn Orton and other investors that there was a possibility they wouldn’t receive the anticipated tax credits because the partnerships, set up to sell biomass gas from landfills to generate electricity, didn’t meet the statutory requirements for the credits.

Orton’s luck may finally be turning, however. He was triumphant in his return to Denver, though the Broncos backed into the postseason anyway by virtue of the Raiders loss to the Chargers. And Orton is surely taking great joy from the fact that Jesus has been so busy enjoying His birthday week, He forgot to keep Tebow from sucking the past two Sundays.

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