Jock Tax

The jock tax is the informal name for state and local income tax charged to a professional athlete by every jurisdiction they work in during a season. It is not a distinct tax and no statute uses the phrase. The underlying rule is the ordinary one that a nonresident is taxable where the work is performed: Ohio's municipal income tax statute, for example, reaches "all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the nonresident for work done, services performed or rendered, or activities conducted in the municipal corporation."

What sets the athlete's case apart is a deliberate legislative choice. Traveling workers usually get relief for short visits, and athletes are written out of it. Ohio Revised Code 718.011 relieves an employer of withholding municipal income tax where an employee performed services in the municipality on twenty or fewer days in a calendar year, and then lists four situations where that relief does not apply. The fourth is that "the employee is a professional athlete, professional entertainer, or public figure, and the qualifying wages are paid for the performance of services in the employee's capacity as a professional athlete, professional entertainer, or public figure."

The nickname is narrower than the rule it describes. Ohio defines all three excluded categories. A professional athlete is one "who performs services in a professional athletic event for wages or other remuneration." A professional entertainer performs "in the professional performing arts ... on a per-event basis." A public figure is "a person of prominence who performs services at discrete events, such as speeches, public appearances, or similar events ... on a per-event basis." A touring band and a keynote speaker sit inside the same clause as a linebacker, so a page or a headline that treats this as an athletes' problem is describing a third of it.

The relief being withheld is an employer withholding rule, which is worth stating precisely. R.C. 718.011 addresses whether an employer must withhold municipal income tax, not directly whether the individual owes it. The practical effect for a visiting athlete is nonetheless immediate: withholding starts from the first day rather than the twenty-first, in every taxing municipality on the schedule.

The hard question has never been whether the city can tax, but how much it can reach. The Ohio Supreme Court answered it in Hillenmeyer v. Cleveland Board of Review in 2015, in the case of an NFL linebacker who played one game a year in Cleveland and was present for two days each time. The court held "that although Cleveland has the right to tax the compensation earned by a nonresident professional athlete for work performed in Cleveland, the city's application of its games-played method of allocating income violates the due-process rights of NFL players such as Hillenmeyer."

The whole argument is about the denominator. Cleveland allocated by games played, so one game out of roughly twenty put five percent of a season's pay in the city. The player's objection was that his compensation covered "the training, practices, strategy sessions, and promotional activities he engaged in" as well as the games, so a game-based fraction taxed days spent elsewhere. The court agreed: "Due process requires an allocation that reasonably associates the amount of compensation taxed with work the taxpayer performed within the city ... By using the games-played method, Cleveland has reached extraterritorially, beyond its power to tax."

Duty days is the method the court accepted, and the record shows the size of the difference. The numerator is days spent working in the taxing city; the denominator is all days the job required. Hillenmeyer had "157 duty days in 2004, 165 in 2005, and 168 in 2006," which produced Cleveland allocations of about 1.27, 1.21 and 1.19 percent against the roughly five percent the games-played method produced. The opinion also recorded that "except for Cleveland, municipalities that have chosen to tax professional athletes do so on the basis of the allocation offered by Hillenmeyer, the 'duty days' approach," so Cleveland was the outlier rather than the norm.

Two dates that will otherwise contradict each other. The version of the Ohio statute at issue in that case gave a twelve-day grace period, because the tax years were 2004 through 2006. The current section, effective March 23, 2015, sets the threshold at twenty or fewer days. A reader who takes the number from the case and the rule from the statute will publish a contradiction. Note also that the exclusion of athletes from the grace period survived the constitutional challenge: only the allocation method fell.

How many places do this is not a question with a citable answer. There is no federal registry of state or municipal income taxes, no requirement that a city announce a policy toward visiting performers, and the position changes with local ordinances. The mechanism is the durable part; a count is not.

How a season becomes a stack of returns.

1. Each jurisdiction identifies the days worked inside it, using its own rule for what counts as a day.

2. Short-visit relief is checked and, for these three categories, does not apply. In Ohio, the twenty-day withholding exemption is expressly withdrawn for a professional athlete, professional entertainer or public figure.

3. Compensation is allocated by a fraction, days in the jurisdiction over total duty days for the year.

4. The jurisdiction's rate is applied to the allocated slice, and the employer withholds it.

5. The home state taxes everything and gives a credit for tax paid elsewhere, which is the ordinary multi-state mechanism.

A worked example, using the court's own figures with a hypothetical salary. Suppose a player earning $1,000,000 for the 2004 season played one game in Cleveland, spending two days there, out of roughly 20 games. Cleveland's municipal rate at the time was 2 percent.

Under the games-played method, one game in twenty is 5 percent of the season, so $1,000,000 times 0.05 is $50,000 of allocated income, and $50,000 times 0.02 is $1,000 of city tax.

Under the duty-days method, using the 157 duty days the record shows for 2004, two days out of 157 is 1.27 percent. That gives $1,000,000 times 0.0127, or $12,700, of allocated income, and $12,700 times 0.02 is $254 of city tax.

Same two days in Cleveland, same salary, same rate, and roughly a fourfold difference in the answer. The salary is invented for the illustration; the duty-day counts, the percentages and the city's rate are the court's.

A traveling performer does not choose whether this applies, so the useful frame is what the design achieves and what it costs.

The case for it

• It follows the ordinary principle that a nonresident is taxed where the work is done, rather than carving out a special rule for high earners.
• Denying short-visit relief to per-event performers targets the small group for whom a two-day visit genuinely represents a large slice of annual earnings.
• Duty-day allocation is a defensible measure of where the work happened, and the courts have treated departures from it as constitutionally suspect.
• The home state's credit for tax paid elsewhere means the total is usually not double tax, only tax at the higher of the rates involved.

The costs and the awkward edges

• Compliance is a genuine burden: a season can produce filings in many states and municipalities, most of them for small amounts.
• The rules are not uniform across jurisdictions, so the same season can be measured different ways in different places.
• Support staff who travel with a team, and per-event workers with far smaller incomes, can be swept in by definitions written with stars in mind.
• Because the categories reach entertainers and public figures too, the nickname hides who is actually affected.
• Allocation depends on records of duty days that an individual performer may not control and may not be given.