November 3, 2020

Blues Captain Leaves for Sin City: How State Income Taxes Played a Role in Alex Pietrangelo’s Departure

On January 3, 2019, no one could have predicted that the then St. Louis Blues captain, Alex Pietrangelo, would be hoisting the Stanley Cup at the end of the 2019 season. In early January 2019, the Blues were in last place in the NHL, but the team turned their season around with the help of the song “Gloria”. A little over a year later, Blues fans could not imagine Alex Pietrangelo wearing anything but a Blue Note as he headed towards unrestricted free agency. But in October 2020, the former Blues captain inked a seven-year, $61.6 million contract with the Vegas Golden Knights.

NHL Salary Cap Takes a Hit

It is presumed that one of the major sticking points in the Blues negotiation with Pietrangelo was the amount of signing bonuses included in any potential contract. The ongoing pandemic has limited the cash flow of many businesses throughout the world, and the NHL is not immune to that reality. Before the pandemic hit, the NHL salary cap was anticipated to increase substantially for the upcoming season, but the league decided to keep the salary cap flat for the foreseeable future. The flat salary cap put the Blues in a bind when it came to fitting Pietrangelo in under the salary cap for the upcoming season, which further complicated negotiations. In his deal with Vegas, he will receive $35 million of signing bonuses throughout the life of the seven-year contract, which likely has major tax benefits for the former Blue.

State Income Tax Comes into Play

Nevada is one of nine states that does not have any state income tax. Athletes’ are generally subject to a “jock tax” in states and cities in which they work.  The athletes’ salaries are commonly apportioned to various states and cities using the “duty days” method. This jock tax is levied by states and cities on athletes who play or practice while in town. Assuming Pietrangelo becomes a Nevada resident rather than remaining a Missouri resident, the structure of his contract provides major tax benefits. This means that half of Pietrangelo’s games will be allocated to Nevada, a no income tax state. In addition, signing bonuses are exempt from the Duty Day calculation provided certain criteria are met. Instead, signing bonuses are allocated to an athlete’s resident state. In this case, all of the $35 million in signing bonuses will be allocated to Nevada and not be subject to state income taxes. If he had remained a Missouri resident and signed a similar contact with the Blues, Pietrangelo’s signing bonus would result in Missouri state income taxes of roughly $1.9 million.

For professional athletes, tax compliance and planning can be an issue when it comes to filing in the proper tax authorities. The Anders Sports, Arts and Entertainment Group has the knowledge to help athletes with tax compliance and planning. Contact an Anders advisor below to learn more.

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June 30, 2020

MLS and MLS4TheLou Push Forward Amongst Pandemic

The outbreak of COVID-19 has been an unprecedented, worldwide event that has affected every aspect of our lives, including sports. Like everyone else, Major League Soccer was not immune from the outbreak. The league barely kicked off their 25th season before sports came screeching to a halt across the globe.

MLS is Back

It has been a little over three months since MLS suspended operations, but the league is ready to get back on the field in Florida. From July 8th to August 11th, the “MLS is Back” tournament will be played in Orlando with all 26 clubs participating. The tournament will feature a World Cup format with a group stage followed by knockout rounds. After the tournament is completed, the league is hopeful it will be able to play out the rest of the season and crown an MLS Cup champion before the end of the year.

Tax Benefits of Playing in Florida

From a tax perspective, players will be playing in a no income tax state during the tournament. This could provide players with large state income tax savings compared to their normal home states that they are accustomed to. For example, MLS star Carlos Vela, plays for LAFC and pays one of the highest state income tax rates in the country for the club’s home games in California. Although players had to take reduced salaries in the updated Collective Bargaining Agreement to get MLS back on to the field, playing in Florida offers some mitigation of financial loss by not paying any state income tax for the games played there.

Updates on MLS4TheLou

On the St. Louis home front, the MLS4TheLou ownership group continues to push forward to be ready for the club’s inaugural season in 2022. The ownership group continues to progress on their 22,500-seat state-of-the-art soccer specific stadium in Downtown West, as part of their vision for the first soccer district of its kind in the US. The district will also feature a training facility and team headquarters across Market Street. Since stadium construction is still in an early phase, construction has continued because social distancing practices can still be safely maintained.

The ownership group was expected to announce the team’s name, crest, and identity in the Spring, but the potential announcement has been pushed back indefinitely due to the ongoing pandemic. The branding unveil is still expected to occur before the end of 2020. The group has other priorities to take care of including appointing front office executives and building out the roster for kickoff in a few years.

The Anders Sports, Arts & Entertainment Group will continue to monitor the ongoing developments for both the return of MLS and the MLS4TheLou ownership group’s continuous expansion team progress.

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March 5, 2020

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December 30, 2019

NCAA Passes Initial Steps for Student Athletes to Benefit from their Likeness

California passed legislation to allow college athletes to be compensated for their likeness. Under this new legislation, schools would not compensate student athletes, but athletes would be allowed to profit off their likeness via third party businesses. This law would not go into effect until 2023. In response to this recently passed legislation, the NCAA’s Board of Governors unanimously voted to allow student athletes the opportunity to profit off their name, image and likeness (NIL), but with a catch.

The Collegiate Model

The actions by the Board of Governors do not allow athletes to immediately benefit from their NIL. Instead, the board has directed each of the NCAA’s three divisions to begin creating a structure for student athletes to make money off their name, image and likeness. Each division has until January 2021 to create a framework on how to govern student athletes. In the official wording, the NCAA added an unclear condition — any benefit would have to be “consistent with the collegiate model.” Many questions will need to be addressed before student athletes see any benefit from their likeness.

Profiting off of Popularity

The road for student athletes to officially benefit from their NIL will certainly be a messy one. If implemented, student athletes will not be paid by their universities, but they will be able to strike deals with businesses to profit off their marketability. Revenue sources would come from autographs, video games, and endorsement deals from shoe and clothing companies. This would provide many student athletes, who will not play professionally, the opportunity to cash in on their peak profitability during their collegiate years. Undoubtedly, the NCAA will want to have oversight of how and when athletes are compensated.

If the NCAA ultimately devises a framework for student athletes to benefit off their likeness in the future, the Anders Sports, Arts & Entertainment Group will have the knowledge to help student athletes with a variety of areas including tax compliance and planning. Contact an Anders advisor to learn more.

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