Refund Rush to Follow Cleveland's ‘Jock Tax' Fumble

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Bebe Raupe

Nov. 12 — The U.S. Supreme Court's refusal to hear Cleveland's “jock tax” appeal is expected to kick off a rush of refund requests, according to a National Football League players’ attorney.

Stephen Kidder, the Hemenway & Barnes LLP tax attorney who handled the challenge to Cleveland's “games played” method of taxing out-of-town athletes, told Bloomberg BNA Nov. 12 that virtually every player dinged by the tax within the past three years could file for a refund.

Cleveland has been “wrongfully taking this money from players,” said Kidder, and the money—estimated at $1 million per season—“should be coming back to them.” Kidder said three years is the statute of limitations for such refunds.

Hunter Hillenmeyer, a former linebacker for the Chicago Bears, brought the challenge to Cleveland's method of taxing visiting athletes, arguing that the games-played methodology taxed approximately 5 percent of his income, where a duty-days methodology would tax about 1.2 percent.

Although NFL players have been taxed the most by Cleveland, Kidder said overturning the 2 percent municipal income tax based upon the number of games in a season, rather than the number of “duty days” spent there, applies to all professional athletes.

The high court's Nov. 9 denial of certiorari effectively blocks the city's effort to tax the income of visiting professional athletes based on the number of games they play in Cleveland (City of Cleveland Bd. of Review v. Hillenmeyer, U.S., No. 15-435, cert. denied 11/9/15).

Aggressive Municipal Tactics Quelled

David Blum, a tax litigation partner at Chicago-based Levenfeld Pearlstein LLC, told Bloomberg BNA Nov. 12 that the end of Cleveland's per-game formula will have a national impact because it will stop other municipalities from pursuing “extraterritorial taxation.”

In reaffirming the duty-day approach, the Ohio Supreme Court told Cleveland that taxing players according to the number of games their team plays in the city is wrong, he said (2015 Weekly State Tax Report 13, 7/17/15).

Cleveland took this approach to the extreme by taxing Jeffrey Saturday, the then-center for the Indianapolis Colts, for a 2008 game that he didn't play in or attend because of an injury, Blum said. In a companion ruling to Hillenmeyer, the Ohio Supreme Court said this form of taxation was patently wrong (Saturday v. Cleveland Bd. of Review, Ohio, No. 2014-0292, 2015 BL 125350, 4/30/15).

Faced with ever-tightening budgets, municipalities are considering increasingly aggressive tax formulas, he said, and if Cleveland's “jock tax” had been upheld, “it could have opened the floodgates” with regard to income apportionment formulas.

In addition, he said, upholding Cleveland's method of taxing out-of-town players could have encouraged a “slow creep” into other occupational realms, such as consultants on short-term assignment in the city.

City Will Comply

In a Nov. 9 statement, Cleveland Finance Director Sharon Dumas said that the city will comply with the Ohio Supreme Court ruling and rewrite its “jock tax” ordinance.

Dumas said the city still believes “we're correct, but if the court says you're not, you're not.”

Kidder said Cleveland is the last city in the nation to tax visiting athletes on a per-game basis.

Seeing the taxation method overturned “is righting a wrong,” he said, because it pulled into Cleveland income that was not earned in Cleveland.

Ohio law forbids local governments from charging most out-of-town workers municipal income tax unless they work there for more than 12 days per year. However, the law exempts visiting professional athletes and entertainers from that ban.

Due Process Violations

Cleveland wanted the high court to overturn an Ohio Supreme Court ruling that found its method of taxing out-of-town players violates these non-residents’ due process rights (Hillenmeyer v. Cleveland Bd. of Review, Ohio, No. 2014-0235, 2015 BL 125366, 4/30/15).

By unanimous decision, the state court invalidated the tax, saying Cleveland must assess taxes based on the total number of days each visiting player works there in a year, as is common elsewhere.

The court remanded the case back to the Ohio Board of Tax Appeals with instruction that tax refunds be awarded on the basis of the taxpayer's duty-day calculation, along with interest as appropriate.

In its petition to the U.S. Supreme Court, Cleveland said that the Ohio court's analysis constitutionalizes income tax apportionment methods, which the nation's high court has long declined to do.

To contact the reporter on this story: Bebe Raupe in Cincinnati at

To contact the editor responsible for this story: Ryan Tuck at