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Former Colt, Bear take tax lawsuit to Ohio's top court

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Former Chicago Bears linebacker Hunter Hillenmeyer says he's willing to pay his fair share of taxes to cities where he played football.

Cleveland, he said, got greedy.

Hillenmeyer and former Indianapolis Colts center Jeff Saturday are suing the city in the Ohio Supreme Court for refunds of $5,062 and $3,294, respectively. They say it’s not the sum that matters but the principle of taxing visiting players based on games played instead of days worked—including taxing them even when they’re hurt and don’t travel.

IBJ reported on the case in December, when Saturday and Hillenmeyer were fighting the case in the Ohio Board of Tax Appeals. The three-man board ruled in February that Cleveland’s per-game method of calculating taxable income didn’t violate state law. Saturday and Hillenmeyer appealed the case to the Ohio Supreme Court.

While a sports hero making millions may not fit the image of an exploited worker, some players and their unions have drawn a line on so-called jock taxes that raise millions for states and cities.

“Nobody likes paying taxes—that’s obvious—but they should be fair,” said Hillenmeyer, 33, who retired in 2010 after eight years in the National Football League. “It was just such an egregious and shameless money grab by the city of Cleveland, it just felt wrong not to try to do anything about it.”

Cleveland has said its approach is legal and reasonable. Just as entertainers are paid only for performances regardless of how much they rehearse, athletes are paid to perform in games, the city has said.

Needy cities

Twenty-one states and eight cities home to major professional sports teams tax visiting players, coaches, trainers and others who accompany the team, said Sean Packard, a Virginia accountant who handles taxes for about 200 athletes. Tennessee lawmakers last month ended a $2,500-per-game levy amid complaints it was discriminatory and cost some lower-level athletes more than they made in their contests.

Revenue from the taxes bolsters budgets still recovering from the 18-month recession that began in December 2007. Almost half of state budgets are smaller than four years ago, according to a Dec. 14 report by the National Governors Association and the National Association of State Budget Officers.

Should Cleveland calculate the 2-percent tax as the players wish, it would lose at least $1 million a year, according to a municipal analysis.

The city, which defaulted in 1978, ranked fifth in foreclosure rates nationally during the recession. In those years and after, it saw declines in employment, income and property taxes, according to its 2014 budget book. Income taxes, which include levies on athletes, account for 60 percent of operating funds.

Air apparent

Athletes are attractive targets because they make billions in combined income and have no say in so-called jock taxes or where they play, according to the Tax Foundation, a Washington, D.C.-based research group that opposes the levies.

The idea gained steam after California used its income tax to extract money from Chicago Bulls players following the 1991 NBA championship over the Los Angeles Lakers, said Robert Raiola, a New Jersey accountant who represents about 125 athletes. Illinois retaliated with its own assessment in what became known as “Michael Jordan’s Revenge,” he said.

Hillenmeyer and Saturday are challenging the way Cleveland assesses its tax, using a “games-played” calculation that divides the number of contests in the city by the number in a season. The players prefer “duty days,” or dividing days in the city by days in a season.

Cleveland confrontation

Hillenmeyer, who started 69 games in his career, in 2006 played an exhibition in Cleveland. The city decided his taxable income for that event was $162,002, based on his $3.2 million total that year, according to papers Hillenmeyer filed with the Ohio Board of Tax Appeals.

Under a “duty-days” calculation as the state uses, the sum was $38,557, according to the filing.

Saturday, a six-time Pro Bowl center, played 13 years with the Indianapolis Colts and won a Super Bowl in 2007 before finishing his career with the Green Bay Packers in 2012.

In 2008, he was injured and missed a game in Cleveland. He was still hit with a $3,294 tax thanks to city regulations that count payments an employer makes to a sick and absent employee.

“It just became a tipping point,” said Saturday, 38, who retired last year and is an analyst for ESPN. “I didn’t want other guys to have to face the same thing.”

Hillenmeyer and Saturday said the city’s method is illegal because their contracts require training camps, meetings and other functions besides games. It’s also unconstitutional because they are treated differently than other taxpayers, according to their lawsuits.

Practice, practice

Cleveland spokeswoman Maureen Harper declined to comment on the case. The city has said in filings that it has discretion as long as the tax is reasonable. Considering games played is a precise measure, the city has said.

“Just like a musician is paid only for a concert performance regardless of how much he may practice to prepare for that performance, the same is true of professional athletes,” the city said in a 2012 Board of Tax Appeals filing.

It’s hard to have sympathy for wealthy athletes, said James Byrne, president of the South East Cuyahoga Browns Backers fan club in suburban Cleveland.

“If a construction worker works here, he’s got to pay, too,” said Byrne, a 53-year-old who works for a fiber-optics company. “The construction worker might not be making millions, but he’s still got to pay his share when he works in another town.”

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  • Indiana has a Jock Tax
    Yes, professional athletes from other states that "perform" in Indiana are subject to Indiana's state income for monies earned in Indiana. However, because of the way county income taxes are structured in Indiana, these athletes do not owe any county income tax (since they do live in an Indiana county). There is not municipal/city income tax in Indiana which is comparable to the Cleveland municipal income tax. The only way a local government in can capture income tax revenue from these visiting athletes id if they have a professional sports development area (PDSA) which captures the income tax on these athletes that would typically go to the state. Indy does have a PDSA, but Indy does not control that income tax rate that can is captured by the PSDA (the State controls the tax rate). Simple, eh!?
  • Legal?
    Not sure how Cleveland's method can hold up. In theory they could apply the same logic to typical business employees who are traveling for work. Which isn't how income taxes work - instead, the city/state that you primarily live or work in collects your income taxes. What if those players just never paid the city?
  • @Inquiring
    I believe they pay just earning's tax.
  • Question
    As this is from Bloomberg, I obviously wouldn't expect the IBJ to interject the story with additional facts, but can someone answer whether Indianapolis levies a similar tax and if so, what the rate is?

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