NHL Players Score an Exemption from Tennessee’s “Jock” Tax


National Hockey League (NHL) players scored big in Tennessee last month when the legislature enacted H.B. 1134, which exempts NHL players from Tennessee’s $2,500 per game occupational privilege tax, Tennessee’s version of the “jock tax.” National Basketball Association (NBA) players are stuck with the tax for another two years before they are also exempt. 

Tennessee enacted the occupational privilege tax on NHL and NBA players in 2009, with a three game maximum per tax year ($7,500). It applied to resident and nonresident NHL and NBA players who were on the roster for 10 or more days during the year and were available to play during games in Tennessee. That means even if the player never stepped foot on the ice or court, the player had to pay the privilege tax. Revenue generated by the tax goes directly to team owners and is used to subsidize the operations of the Memphis Grizzlies’ FedEx Forum and the Nashville Predators’ Bridgestone Arena, including paying the costs of entertainers who perform in those stadiums. 

While $2,500 does not sound like much money for professional athletes who make millions, players at the lower end of the pay scale suffer from the high tax burden. Tennessee’s occupational privilege tax is one of the nation’s highest taxes for visiting athletes. In July 2013, a representative of the NHL players’ union told state lawmakers that 43 percentof players in the NHL end up paying out of pocket for games played in Tennessee. That means that those players’ tax burden for those games is higher than their salary. For the 2013-14 season, an NHL player earning the league minimum of $525,000 would make a little over $2,500 per duty day. That is an almost 100 percent tax rate for the days games are played in Tennessee. When adding in the federal tax burden, NHL players on the lower end of the pay scale have little or nothing left in take home pay. 

Tennessee Rep. David Alexander, H.B. 1134’s lead sponsor, said the tax would fail constitutional challenges because it applied to NHL and NBA players only, exempting NFL players. The NFL reportedly made an agreementwith the Tennessee legislature before the tax was enacted in 2009, which is why NFL players were never subject to the tax.  There are also questions about whether the law violates the commerce clause because it taxes nonresidents differently than residents (nonresident players pay the $7,500 maximum tax for only a few in-state games, while resident players pay the $7,500 maximum tax for over 40 in-state home games spread throughout the entire season). The NHL Players’ Association is already suing Tennessee for taxes levied against players from 2009 through the end of the 2012-13, when the NHL agreed to reimburse the players’ tax payments under a new collective bargaining agreement. 

Now that NHL players are exempt from paying the privilege tax,  local revenue will decline $2.16 million for fiscal year 2013-14 and $3.6 million beginning in fiscal year 2014-15.

NBA players will have to wait until June 2016 before they are exempt from the tax. Heavy lobbying by Memphis Grizzlies’ team executives, who support the tax because it raises revenue for FedEx Forum, persuaded lawmakers to allow the tax to continue for another two years. But the law was amended so that NBA players must be on the roster for 15 days during the tax period before being subject to the tax, instead of 10. The tax rate remains the same. According to the National Basketball Players Association, about 20 percent of NBA players lose money or break even when they play in Tennessee. So NBA players making the league minimum will still suffer from the high tax burden until they are exempt too. 

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you think a privilege tax on professional athletes is fair? 

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