NFL players dispute how Cleveland levies city income tax on them

By Marc Kovac

news@vindy.com

COLUMBUS

Should professional athletes be forced to pay municipal taxes in some Ohio cities based on the number of games they play each season, or for games they miss due to injury?

Those are questions the Ohio Supreme Court is considering, following oral arguments in two cases Wednesday challenging the way one Ohio city determined tax obligations for two professional football players.

The athletes were required to pay municipal income taxes when their teams faced the Browns in Cleveland.

In the first case, Hunter Hillenmeyer, a linebacker for the Chicago Bears from 2004-06, argues that the city of Cleveland used the wrong method for determining what he owed.

Cleveland imposed its tax bill based on the number of games the Bears played in each season, leading to a higher obligation. Hillenmeyer argues the tax should have been determined based on the total number of days he worked for the football team in each year.

According to documents, “A visiting football player who travels to Cleveland for two days during a 160-day season for his team to play the Cleveland Browns will not have the [1.25 percent] of his income allocated to Cleveland to tax purposes. Instead, because he played one out of 20 games (including preseason games) in Cleveland, [5 percent] of his income will be allocated to Cleveland.”

Hillenmeyer has sought a refund of about $6,000, the difference between the two methods.

Ryan McManus, legal counsel for Hillenmeyer, told justices Wednesday that Cleveland is levying taxes on professional athletes for work that takes place outside of the state.

“By using the games-played method for taxing professional athletes, the city of Cleveland is reaching beyond its borders and taxing income earned for services performed elsewhere,” McManus said. “The games-played method rests on the faulty premise that all professional athletes ... are paid only for playing in games. As a result, it allocates to Cleveland income earned for practices, team meetings, training camp and a host of other activities, all of which Mr. Hillenmeyer was contractually obligated to perform and all of which occurred outside of the city of Cleveland.”

In the second case, Jeffrey Saturday, a former player for the Indianapolis Colts, was forced to pay Cleveland municipal taxes for a game he did not play.

Saturday was injured at the time of the 2008 game in question and remained in Indianapolis.

According to documents, Saturday was “a nonresident who never entered Cleveland during the relevant tax year, much less performed any services there. ... The city of Cleveland nevertheless imposed its income tax on 4.5 percent of Mr. Saturday’s wages. Such extraterritorial taxation of wages is contrary to Ohio law and is unconstitutional.”

McManus, who also represented Saturday, said Cleveland is “clearly overreaching” by taxing players for games they did not play.

“There’s no dispute that Mr. Saturday performed no work or services in Cleveland,” he said.

Saturday has sought a refund of $3,500.

Linda Bickerstaff, representing Cleveland tax officials, said the city has the authority to tax professional athletes as it sees fit, and those taxes don’t have to be based on time or days spent in the city.

“What method Cleveland uses to tax professional athletes is strictly a local matter,” she said. “The law does not require use of one method or another. The law only requires that whatever method is selected reasonably relates to the income produced in activity in the taxing jurisdiction. It simply cannot legitimately be disputed that the games-played method does just that.”

On the Saturday case, Bickerstaff said the player received income for the Cleveland game, regardless of whether he was in the city or not.

She said it’s no different than people who work in Cleveland who are paid for a vacation or sick day.

“They’re being paid for the game in Cleveland,” she said. “The income itself, again, is being derived from an activity that occurs within the city of Cleveland.”

She added, “The income-generating activity is the game itself. So long as the game has taken place in the city of Cleveland, the city has the right under its ordinance as well as under state law to tax the income earned for that game.”

Justices questioned tax officials’ reasoning in the Hillenmeyer case, given the city’s agreement to share tax revenues with the community that plays host to the Browns’ training camp.

“They’re taxing the training as though it were income,” Chief Justice Maureen O’Connor said. “[The city] wants to ignore the requirement of training with regards to other athletes that come to Cleveland to play.”

Supreme Court Justice William O’Neill offered on the Saturday case, “I guess if we took the city of Cleveland’s logic to its logical conclusion, they should have taxed the groundskeeper in Indianapolis that day, shouldn’t they?”

O’Connor added, “Do you tax sports announcers, television personalities, that might be located in New York or LA when they’re commenting on what’s happening in a Cleveland football game?”

The Supreme Court is considering both cases and will decide at a later date.