CA State Treasury to the Philadelphia Eagles: “THANK YOU!”

Posted on Fri, Dec 08, 2017 ©2021 Drucker & Scaccetti

Eagles Logo.jpgBy: Joseph Criscuolo

 

Despite their 24-10 loss to the Seattle Seahawks this past Sunday night, the Philadelphia Eagles are still only one win away from capturing their first NFC East division crown since 2013. At 10-2, the Eagles are still tied for the best record in the NFL. They will still make the playoffs, and possibly even capture a first-round bye if all goes well. Carson Wentz is still one of the best quarterbacks in the league this season and a deserving candidate for the NFL’s Most Valuable Player award.

 

Still, this loss to Seattle has left some Eagles’ fans with legitimate concerns. Do the Eagles have the experience for a January playoff run? Can this team win if Wentz doesn’t play like Superman? Can Doug Pederson match wits with the NFL’s top echelon head coaches?

 

While we’re left to ponder the answers, the Eagles spent this week in Los Angeles awaiting their December 10th tilt against the L.A. Rams. To avoid additional jet-lag and expense, the Eagles’ kept the team on the west coast – in California. Seems like an innocuous decision, and to a certain extent it is, unless it’s time to file and pay taxes. Yes, it appears the Seattle game was not the only loss the team suffered this week. The decision about travel between Seattle and Los Angeles (site of their next game) will cost some players tens of thousands of dollars.

 

As defined under California regulations, a “duty day” is "any day services are performed under the contract from the beginning of an official preseason activity until the last game played". This generally includes performing in games, practices, meetings, certain promotional events, etc. The duty days in California are then divided by the total duty days everywhere to create a ratio. This ratio is then multiplied by the player’s total compensation earned during the year. The result is deemed to be California source income, potentially subject to the top tax rate of 12.3%.

 

The additional duty days sourced to California because of this extended trip means the players are paying an unexpected premium for maintaining a “normal” schedule. For defensive tackle Timmy Jernigan, who is slated to make just over $11 million dollars this year, this could result in as much as $35,000 of additional tax owed to the State of California. That’s more action than any fan would lay in hopes of an Eagles win – pending the line, of course. Regardless of who prevails in the football game, the State of California is the real winner here.

 

The Eagles began this trip in the State of Washington, one of seven states with no state-level income tax. Why not spend the week in Washington? The duty days would have been allocated to a no income tax state, effectively decreasing the amount of compensation subject to California tax. It’s not just California either – the player’s duty day ratios across all taxable states is diluted, resulting in tax savings. If I were Timmy Jernigan, I would want to know why we didn’t stay in Washington.

 

Maybe it’s just the price of doing business in the NFL. Or, maybe, as tax and business advisors, we have an innate ability (or curse) to view every decision in terms of the inevitable tax implications it will generate. At Drucker & Scaccetti, our highly skilled consultants are adeptly experienced at planning these multi-state tax issues for professional athletes before there are any surprises. If you or a client have these tax issues and need help, please call on us.  We are always prepared to help with this or any other tax-related matter. Go Birds!

 

Topics: Multi-state taxes, Duty Days, Taxes for Athletes, Tax planning for athletes, Philadelphia Eagles, Philly, Football, Doug Pederson, Carson Wentz, California taxes, Timmy Jernigan, NFL, MVP

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