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Boston Attorney Seeks Consistency in Athlete Taxation: Says Pro Athletes Can Be Taxed in Every State Where They Play Games

Stephen Kidder, a former Massachusetts Commissioner of Revenue, has been called "the guru of state taxation of professional athletes."

Now Kidder, a Boston tax attorney, is looking to make consistent the way those athletes are taxed.

Currently, state income tax regulations nationwide have clauses that allow states to tax any individual who performs professional services within a given state's borders.

Yet the states don't always enforce those rules for everyone, according to Kidder, sports agents and accountants.

Instead, armed with published salary figures and team schedules that show when an athlete played in-state, states and cities have found it profitable to chase professional athletes for taxes on income they earned while in their state or city.

It's a practice that has meant some athletes must fill out as many as 20 state and city income tax returns, simply because they played a game within that city or state during the course of a season.

"There are very few things the leagues, players and teams agree on. State taxation is one of those issues." Stephen Kidder, Tax Attorney, Hemenway & Barnes

Currently, Kidder is representing the National Hockey League Players' Association in an Illinois lawsuit, which is challenging what Kidder called the state's selective collection of taxes and penalties from visiting professional athletes.

Kidder acknowledged that he's facing an uphill legal battle to bring consistency to the many state statutes and enforcement practices, but he says he won't stop going to bat on the issue.

Kidder, who was Massachusetts Commissioner of Revenue from 1987 to 1991, has practiced tax law at Boston-based Hemenway & Barnes since 1991 and legally represents the NHL's Players' Association and the Major League Baseball Players' Association.

"There are very few things the leagues, players and teams agree on," Kidder said. "State taxation is one of those issues."

While all states have had for years the legal right to tax players from visiting teams, many states never enforced the rule, citing too much administrative burden or the poor public relations that sometimes follows. But as athletes' salaries have sky rocketed, many cities and states find the extra work worth their while.

Yet not all athletes are so wealthy. Retired athletes, for example, need help from the players associations and Kidder when states seek retroactive payments and accrued late fees and penalties-from athletes who stopped playing several years ago.

Most notorious for chasing down athletes are the states of California, New York, Missouri and Illinois. Cities that collect city income taxes aggressively include Philadelphia and Detroit.

Massachusetts has a law on the books that gives it the right to tax visiting players, but Kidder says the Bay State is not considered an aggressive collector of those taxes.

Robert Goodenow, executive director of the National Hockey League Players' Association, said Kidder's experience with state and federal tax law issues has been an asset to the organization.

"We feel there are some real onerous filing requirements for players," Goodenow said. "Some players are required to file six, seven, eight tax returns because of the ramping up of local tax offices."

At one point, Kidder and others attempted to streamline the system by proposing a nationwide tax structure to the Federation of Tax Administration, the nationwide organization of revenue commissioners. The structure which was turned down with no replacement in the hopper called for taxing athletes based on a simple formula: divide the number of days in a season by the number of "duty days" a player spends in each state. The resulting figure would be the amount owed in each state.

"The reason athletes are picked on is because they're public, their schedules are public and their salaries are public," Kidder said. "It tends to be easy pickings."

"Obviously, the tax issues for professional athletes and hockey athletes has become a major issue over the last few years," said hockey agent Robert Murray, a partner at the Boston law firm Murray & Murray. "It's become a nuisance for everyone involved."

Murray said Kidder negotiates well with states seeking retroactive taxes and penalties- a sticking point with athletes who see the practice as a surprise attack on their wallets.

Judy Hamilton, a San Diego-based certified public accountant with a client base of more than 60 professional athletes, said most of the work she handles is on what she calls, "the multi-state issue."

Hamilton, president of Hamilton Accountancy Corp., has worked with Kidder on panels tackling this issue and once introduced the Boston attorney as "the guru of state taxation of professional athletes."

© Boston Business Journal. March 5, 1999.
Reprinted with permission. All Rights reserved.