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Brett Favre

NFL Players Get Sacked With Tax Memo

by Kelly on December 17, 2008 · 4 comments

in sports & tax, taxes of the rich and (in)famous

The National Football Post notes that what’s on the minds of NFL players this week isn’t what foolishness is going to come out of the mouth of TO, but taxes. Agents for NFL players were reportedly sent a memo this week by the the National Football League Players Association, calling their attention to IRS code section 409A, Inclusion in gross income of deferred compensation under nonqualified deferred compensation plans.

Deferred compensation plans? The NFL? That’s for executives, right? And club owners?

Nope. The section is applicable to all deferred compensation arrangements which are not otherwise exempt - and that would include that signing bonuses. The Code says, in part,

all compensation deferred under the plan for the taxable year and all preceding taxable years shall be includible in gross income for the taxable year to the extent not subject to a substantial risk of forfeiture and not previously included in gross income.

What that means is that bonuses and future payments which are negotiated in advance are taxed in the year that the contract is signed and not when the money is actually received. This applies to signing bonuses which are guaranteed and not those that are dependent upon a specific event that may not happen, such as making it to the Super Bowl (Um, Romo, are you reading?).

There are exceptions to section 409A which can prevent immediate taxation of future income but those are not applicable to these contracts. Most corporations include language and restrictions in their contracts to avoid this very result. Apparently, the NFL bobbled this one. According to the NFLPA “… NFL clubs did not draft or amend many NFL player contracts in order to bring them into compliance with Section 409A of the Internal Revenue Code.” Oops.

The NFL is now scurrying to ensure that contracts are up to speed by the end of the year. Significant deals signed this year include the Philadelphia Eagles’ acquisition of Asante Samuel from the New England Patriots and Brett Favre’s move from the Green Bay Packers to the New York Jets. Samuel’s deal is worth a reported $57 million with approximately half to be paid later. Favre’s three year deal is something of a secret, but allegedly includes almost $30 million in future compensation, with bonuses guaranteed even if he takes an early retirement. I’m not sure how either contract is structured but one can likely assume that they would be affected by the NFL’s actions.

Football in December has just been made even more interesting… Playoffs and taxes. I’m in heaven.

Go Eagles!

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Fix the Tax Code Friday: Should Everyday Really be Sunday?

by Kelly on July 18, 2008 · 10 comments

in fix the tax code friday, sports & tax, state & local, tax policy

The Vikings apparently can’t win for losing. First, they had to deal with the soap opera that is Brett Favre and the Green Bay Packers - in case you somehow remarkably missed the drama, Favre talked to the Vikings about a position on the team - as a result, the Packers, who have indicated that they will not release Favre filed tampering charges with the NFL against the Vikings. Now, residents are apparently revolting against the state’s plans to build stadiums with tax dollars.

To be fair, it’s rare that taxpayers ever want to finance new stadiums, no matter how much revenue they may (or may not) bring to an area. It’s difficult to understand why your tax dollars should contribute towards the cost of a stadium that will benefit players and coaches at your expense - and that’s after you’ve forked out way too much money for tickets and stadium beer. But the reality is that teams will - and do - move if the stadiums aren’t built.

So, of course, states like Minnesota, are scrambling to balance the benefits of having a team in their state with the angry reactions from fans and tax payers. According to the NFL, the Vikings have never had a stadium of their own - they share a stadium with the Minnesota Twins (wow, I didn’t even know that Minnesota still had a baseball team). They are only one of three NFL teams with stadiums doing double duty. I think, but am not certain, that the other teams are Oakland and Atlanta (if you know better, please let me know in the comments).

Minnesota had initially agreed to use public money to help fund a new $1 billion stadium which would open in 2012. Maybe it’s the economy - or maybe it’s the lack of enthusiasm about the Vikings - but that has since changed. In 2008, state officials said they would not support public financing for a new stadium but of course, with the lease at the old stadium looming, most think that will change. And that doesn’t mean that people are happy about it.

Dean Brian Carter, of Washington County, Minnesota, has been charged with six felony tax crimes for failing to file and pay taxes. Among the reasons that Carter cited for not complying was that he didn’t think tax money should be used for building stadiums.

This comes back to a question that I asked before about the war in Iraq: should you be able to pick and choose where your tax dollars go?

So, today, since it’s Friday, let’s talk Fix the Tax Code! Today’s question is split:

Who should pay to fund sports stadiums?
Should taxpayers shoulder the burden since stadiums ostensibly bring revenue and glory to the City? (I note that in Philly, we’re still waiting on the glory)
Or should the team players and owners bear the cost of expansion and improvements?
Or should season ticket holders and visitors to the stadium pay via a surtax?

Tell me what you think.

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