Pittsburgh’s Jock Tax is Ruled Unconstitutional
- Kyle Stich
- Jan 13, 2023
- 5 min read
Updated: Jan 12, 2024
Judge Rules Pittsburgh’s Facility Fee is a Violation of Pennsylvania’s Constitution and Prohibits the City from Collecting It
UPDATE AS OF JANUARY, 12, 2024: On January 10, 2024 The Commonwealth Court of Pennsylvania issued a ruling on the appeal filed by the City of Pittsburgh regarding the enforcement of Pittsburgh's Non-Resident Sports Facility Usage Fee, which between the initial ruling and appeal, the City has acknowledged is indeed a tax.
In a two to one opinion, the court ruled to uphold the lower court's ruling, which was in favor of the athletes. At issue in Judge Ellen Ceisler's opinion was the discrepancy of the Uniformity Clause and the language of the law that allowed Pittsburgh to impose the tax in the first place. Further to what is discussed in the original analysis of the Uniformity Clause below, Judge Ceisler leaned on the fact non-residents were not subject to equal taxation as residents. When the City of Pittsburgh suggested they strike the term "non-resident" from the tax, Judge Ceisler argued that doing so would violate the language in the initial law, which solely allowed the imposition of the tax on non-residents. Therefore, the Judge had to decide whether the initial law should take precedent and decided that it should.
With yet another victory in court, athletes who were subject to tax are closer to receiving payments to refund their taxes that were unjustly paid to the city. However, athletes expecting those checks should not go out and spend that money just yet. There is the possibility for the City to appeal once more to the Pennsylvania Supreme Court. The dissenting opinion written by President Judge Cohn Jubelirer makes that a very likely possibility and opened the door for the City to ultimately win the case.
Judge Jubelirer offered a different interpretation of Pennsylvania's Uniformity Clause focusing on the "equality of tax burden among members of a class." There are two issues at hand:
"The equity of tax burden:" Residents of Pittsburgh have always been subject to a 3% tax on the totality of their income. Of that 3%, 1% goes to the City's general fund and the remaining 2% to the local school district fund. The Facility Usage Tax also subjected non-residents to a 3% tax on their income earned in the City, with all of the money "attributed" to the City's general fund. It was the Judge's interpretation that because both residents and non-residents were ultimately subject to 3% tax, there is "equality of tax burden."
"Members of a Class:" The bigger question that Judge Jubelirer lays out is whether it is fair to create a "separate class of entertainers and athletes" and if that factors into the Uniformity Clause. The previous ruling had held it of importance that athletes and entertainers were being treated differently than people in other occupations. Judge Jubelirer points to multiple cases ruled on by the Pennsylvania Supreme Court and the Ohio Supreme Court that lay out justification for why it would be legal and logical to treat athletes and entertainers as a separate class.
The two central points laid out by Judge Jubelirer in their dissenting opinion provides a clear argument and path for the City to appeal once again. Given a second appeal is likely, the City will continue to hold any refunds until that appeal is heard and ruled on. With this past appeal taking a year to resolve, a quick resolution is not on the horizon. After the second appeal to the Pennsylvania Supreme Court, there will be a final resolution. Whether that is in favor of the City or the Players is very much up in the air, especially with the dissenting opinion offered by Judge Jubelirer.
PREVIOUS VERSION WRITTEN JANUARY, 13 2023: This past September Judge Christine Ward struck down a fee levied by the City of Pittsburgh against visiting professional athletes’ wages, calling the fee an unconstitutional tax under Pennsylvania law. The ruling marks the third major defeat against a jock tax over the past decade as in April of 2014 Tennessee voted to eliminate their special tax for professional athletes, while in May of 2015 the Ohio’s Supreme Court ruled that the City of Cleveland’s apportionment formula was unconstitutional.
What was at Issue?
In November of 2019, the Players’ Associations from the NFL, NHL, and MLB filed a lawsuit against the City of Pittsburgh claiming that the City’s Non-Resident Sports Facility Usage Fee is actually a tax. The lawsuit argued the “tax” unfairly proportions income and taxes non-resident athletes at a higher rate than those athletes who live in Pittsburgh.
Although the Non-Resident Sports Facility Usage Fee was originally implemented in 2005, two major changes were made by the City in 2017 that brought this issue to light. First, the onus of reporting this fee has shifted from only the team, to a shared responsibility between the team and the player, with the player now being held accountable for the tax if unpaid. Second, the city changed the apportionment of income to be taxed from a duty day formula to a game day allocation formula.
The lawsuit claims the “tax” is unconstitutional at both the State and Federal level and focuses on three arguments to support this claim:
Although it is labeled as a facility usage fee, it is in fact a tax which is based on income.
Non-resident athletes are taxed at a higher rate (3%) than resident athletes of Pittsburgh (1%)
The City’s use of game day allocation to determine the tax does not accurately apportion the amount of income earned in the city
Ruling
In order to apply Pennsylvania’s Uniformity Clause and prove that the fee was in direct violation of the Pennsylvania Constitution it needed to show: 1) the fee was in actuality a tax in nature and 2) the tax was not uniform between residents and nonresidents as well as uniform across occupations.
Judge Ward ruled that the Facility Fee was in clear violation of the Uniformity Clause of the Pennsylvania Constitution because:
The ‘fee’ was indeed a tax as it was an assessment against salaries and wages.
The tax not only was discriminatory across residents and nonresidents it also was unequal across the same profession.
What is Next?
Most important, the court issued an injunction that, among other things, prohibits further collection of the tax. Pittsburgh has the right to appeal, and that could take many months, if not a year or more. The City of Pittsburgh may also ask the appellate court to allow it to continue to collect the tax while the appeal is pending. As of right now, the City can no longer collect the tax.
If the decision stands, players may be entitled to refunds of some Jock Tax payments they previously made to the city. If it is determined that an individual played any games in the city of Pittsburgh, they would need to check with their team to see if the team paid the “tax” on their players’ behalf. If the team did not pay it on their players’ behalf, it is likely the “tax” was deducted from their player’s paycheck.
If the tax was deducted from the players’ paychecks, they are entitled to claim a refund for the difference in tax paid. In order to do this, a petition would need to be filed along with the W-2 statement, a year-end pay stub, and a letter from the team with all or any of the three indicating the amount of Facility Usage Fee paid to Pittsburgh.
Conclusion
Pittsburgh represents the third jurisdiction over the past decade to have their jock tax proven to be found unconstitutional, following Cleveland and Tennessee. At the heart of all three arguments is uniformity and apportionment. Not all jock taxes are illegal. However, if a tax is found to be arbitrary or unfairly apportioned into a state or city, athletes have rights to challenge it. So far, athletes are undefeated in their challenges.
AFP Consulting has already taken the necessary steps for our clients to obtain any potential refund they are entitled. If you believe you are impacted by this lawsuit and would like additional information, please don’t hesitate to contact our office to discuss your options.
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