The Super Bowl means different things to different people. For some, it’s a chance to watch their favorite team battle for the title of World Champion; for others, it’s the one day of the year they actually watch commercials on TV. For the Philadelphia Eagles, this year’s Super Bowl was the end of an era as the underdogs emerged victorious, finally winning their first Super Bowl. For the Eagles, and many other super bowl fans, it may come as a surprise that football’s most anticipated game of the season also comes with many unanticipated tax consequences for the players and the host city.
After the confetti falls and the parade ends, the Eagles will be left with the glory of the win, a $112,000 bonus, a championship ring, and a tax bill that will likely end up costing more than the value of the ring itself. Including their Super Bowl bonus, Eagles players will receive $191,000 in total playoff bonus money, which as income is subject to federal and state income tax. After accounting for federal and Pennsylvania income taxes, each player will receive just over $100,000 in net pay, Ryan Prete reports in the Bloomberg Tax Daily Tax Report: State (subscription required). To add insult to injury, the ring will also be considered part of the Eagles players’ 2018 income as a taxable fringe benefit.
The Eagles will also be subject to Minnesota’s “jock tax,” an income tax imposed on non-resident athletes based on the number days spent in Minnesota during which the individual is under a duty to perform for the employer (known as “duty days”). Under Minnesota law, championship bonuses are considered income subject to the jock tax that must be allocated to the state using the duty day formula.
Because Super Bowl LII was held in Minnesota, the jock tax imposed on the Eagles’ bonus will be higher than those paid in most other years. With a top marginal rate of 9.85 percent, Minnesota’s individual income tax rate is among the highest in the country, and is the second highest rate among states with NFL teams. Had the Eagles played in the championship just one year earlier, they could have escaped the jock tax entirely—Super Bowl LI was played in Texas, a state with no individual income tax.
However, the revenue Minnesota will gain from the jock tax may be offset by the revenue Minnesota will lose ($250 to $3,400 per ticket) by exempting the price of admission to NFL games and other sponsored events from state and local sales and use tax, according to Prete’s article. Although states provide incentives such as these to bring stadiums, and their related increase in revenue and jobs, into their state, the incentives don’t always pay off, René Blocker of Bloomberg Tax, a managing editor specializing in sales and use tax, told Prete.
No matter who you were pulling for, or who you think are the tax winners or losers, I think we can all agree on who the real winner of the day was: Super Bowl selfie kid.
Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Do you think jock taxes are winners for state tax policy?
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