Pittsburgh created a “Non-Resident Sports Facility Usage Fee” (“Facility Fee”) in 2016. It subjected nonresident professional athletes who used the city’s sports venues to a 3% assessment on personal income earned while doing so, however, resident professional athletes were not subject to the Facility Fee. Under this tax, following a professional sports game in Pittsburgh, 3% of each nonresident players’ game check was withheld by their team and paid to the City of Pittsburgh, while professional athletes who lived in the City only faced a 1% income tax. Unfortunately for Pittsburgh, what was thought to be a “fee” was actually a tax, and with that determination came consequences. The Court of Common Pleas of Allegheny County ruled the Facility Fee is unconstitutional, by Pennsylvania Constitution standards.
Two conclusions led the court to the determination that the Facility Fee was unconstitutional. First, the court found the Facility Fee to be a “tax in substance” because it lacked the distinguishing features of a fee. Second, the court found the Facility Fee was not uniform as applied to Pittsburgh residents and nonresidents.
Let’s take a look at the court’s first finding. In it, the court found the “fee” to be a tax by considering various determinative factors. For example, there was not a licensing authority that collected the Facility Fee and regulated the use of the facilities, nor was the Facility Fee subject to supervision or regulation. Also, use of the facilities was not conditioned upon payment, rather the Facility Fee was assessed based on the amount of time the athletes used the facilities and payment occurred after such use. The Facility Fee was not used to reimburse a licensing authority for the expense of its supervising and regulating. The court explained the Facility Fee instead fit the description of a tax, stating it was enacted for the specific purposes of raising revenue for the general public and reducing Pittsburgh’s Amusement Tax. Additionally, revenue from the tax was included in the City of Pittsburgh’s budget report in the “sources of tax revenue” category. Finally, the count found the Facility Fee meets the city and state definition of income tax, as it is an assessment against salaries and wages. Thus, the court found the Facility Fee more closely resembles a tax than a fee.
In the court’s second finding, it determined the Facility Fee to not be uniform as applied to Pittsburgh residents and nonresidents. The Uniformity Clause of the Pennsylvania Constitution requires similarly situated people to be taxed in a substantially uniform fashion. Furthermore, Pennsylvania courts have established that residence cannot be the basis for discrimination in taxation of people engaged in the same profession, and that such a distinction violates the Uniformity Clause. Therefore, the court found the Facility Fee to be unconstitutional, as there was an unequal application of tax rates across residents and nonresidents and an unequal application of tax rates across the same profession.
This isn’t the first time a “jock tax” has gotten into trouble. In 2015, the Ohio Supreme Court struck down the “games played” method of determining taxes of NFL players, saying it violated the Due Process Clause of the U.S. Constitution. These rulings put the future of other state or local “jock taxes” in question, especially when such taxes distinguish between resident and nonresident players.
However, be careful about how broadly one defines a “jock tax.” Often this term is used to describe ALL state taxes that apply to athletes, including regular income taxes, which all athletes pay to any state in which they're playing a game. But these kinds of “jock taxes” are in no danger of going away, since they’re the same types of taxes that apply to any taxpayers working or performing services in multiple states, and for the most part these income taxes are applied consistently to resident and nonresident taxpayers.
