- The Washington Times - Tuesday, June 12, 2001

Baltimore Orioles second baseman Jerry Hairston, after three years bouncing around the team's farm system, finally stuck on the major league roster last year.

Among Hairston's rewards for landing an everyday role with the Orioles: tax forms from more than a dozen cities and states where Baltimore played away games. On road trips, Hairston and nearly every other pro athlete incur taxes designed specifically for traveling athletes and entertainers, widely known as "jock taxes."

"It was a real eye-opener for Jerry," said Joe Geier, Hairston's Ellicott City, Md.-based financial adviser and president of Geier Financial Management. "I work with a number of young players, and the first time these guys see all their out-of-state returns piled up a couple of inches high, they look at it and say, 'What is all this?' Now that most of the places are now requiring those taxes be withheld from their checks, it comes into even more focus."

A part of some states' tax codes for more than 20 years, jock taxes are quickly spreading to new municipalities, and the old ones are enforcing theirs with unprecedented vigor.

Arizona and Columbus, Ohio, joined nearly 30 other states and cities in the jock tax parade last year. Next month Ohio begins mandating the withholding of state taxes for pro athletes visiting Cleveland, Cincinnati and Columbus. Violators risk an audit going back as far as the state deems necessary. And the American Institute for Certified Public Accountants, the country's largest professional group for CPAs, has begun providing seminars specifically on preparing out-of-state taxes for pro athletes.

The reason for the popularity of jock taxes is quite simple. As the economy cools and tax revenues flatten, pro athletes and their publicly known seven- and eight-figure salaries are seen as a lucrative way to keep city and state coffers full. California by far leads the way with more than $90 million collected each year in jock taxes, but several other states also top $10 million.

"For a lot of years, there were gentlemen's agreements between the states not to tax athletes," said Gary Gudmundson, spokesman for the Ohio Department of Taxation. "In the '70s, New York and California broke the agreement. Since then, a number of states and cities have joined them, and now we're seeing a lot of places getting much more organized about this."

Enforcement of the out-of-state jock taxes is so complex but still critical to public revenues that many states and cities employ full-time staffers dedicated solely to collecting them. With the taxes usually applicable to any member of a pro team's traveling party coaches, trainers and injured players included that amounts to more than 4,000 returns for each city or state in question, almost all of them subject to the highest tax rate.

"If you earn income in Maryland, it's taxable in Maryland. Now the collection of those taxes can sometimes get a little complex, but that's the basic rule," said Michael Golden, spokesman for Maryland Comptroller William Donald Schaefer. Maryland is among those assessing jock taxes; the District is not.

Texas Rangers shortstop Alex Rodriguez tops all pro athletes in out-of-state tax payments, thanks to his 10-year, $252 million contract and more than two dozen games a year in California, whose 9.3 percent top tax rate is among the highest in the country. The Wall Street Journal estimates his total 2001 out-of-state tax obligation will top $525,000.

As average salaries in all four major team sports have passed $1.2 million, out-of-state tax payments in the low to mid six figures are common. Los Angeles Lakers center Shaquille O'Neal will be required to pay nearly $4,000 in taxes to the City of Philadelphia for each NBA Finals game played there against the 76ers.

Athletes filing out-of-state returns usually can use those tax payments as credits against their tax obligation in their home state. But if the athlete lives in a state without income tax, such as Texas, Florida or Nevada, or in a state with a relatively low income tax rate, visits to high-tax states like California or New York quickly can become costly.

"The long flights are not the only reason why a lot of guys don't like West Coast road trips," Geier said. "A player here in Maryland is subject to an effective state tax rate of 7.5 percent. Once they step in California, it's 9.3 percent, so they're losing almost another 2 percent of income as long as they're there."

The out-of-state tax fees are typically determined by an accounting term called "duty days." Duty days are defined as the number of days each year an athlete spends playing or practicing for his team. The percentage of duty days spent in a state where athletes are taxed is the percentage of income subject to that tax.

Disputes, however, often arise in what exactly constitutes a duty day. Several states seek out taxes on off days spent on the road, which many players find particularly grating. And a 9-year-old legal challenge in Illinois involving former Chicago White Sox pitcher Scott Radinsky and his jock tax bills is still pending.

In 1992, Illinois implemented jock taxes on visiting players coming from states where Chicago teams were assessed out-of-state taxes. The tax became known as "Michael Jordan's Revenge," as it was seen largely as retaliation on California taxes levied on the Bulls during the 1991 NBA Finals against Los Angeles.

That new tax, however, was combined with another provision that sought out additional taxes from players on Chicago teams, regardless of where they made their permanent residences or duty days spent in Illinois. About 100 current and former Chicago players and the Major League Baseball Players Association are seeking relief from that rule and are awaiting a ruling on Radinsky, who has been advanced as a test case.

Outside of Illinois, athletes have little recourse than simply pay the taxes.

"We teach our clients as soon as they sign that this is unfortunately the way it is," said Kim Morton, vice president of financial services for Coordinated Sports Management Group, an Illinois agency representing more than 100 pro athletes. "The other thing they learn right away is that taxes are almost never done by April 15. It's all so massive now, we couldn't do it without extensions."

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