PITTSBURGH – Counsel for a trio of professional athletes and the players’ associations of Major League Baseball, the National Football League and the National Hockey League, all of whom alleged that the City of Pittsburgh’s “jock tax” applied to both resident and non-resident athletes is unconstitutional, have won summary judgment in their clients’ case.
The plaintiffs believed that the City’s argument that because it financed the construction of its major sports stadiums through taxpayer funds, it has the right to tax the individuals using the facilities in order to get its money back, is faulty – and a state court judge agreed in a Sept 21. memorandum opinion and order.
The unions – along with former Pittsburgh Penguins forward Scott Wilson, New Jersey Devils forward Kyle Palmieri and veteran former baseball player Jeff Francoeur – initially filed suit in the Allegheny County Court of Common Pleas on Nov. 5, 2019 against the City.
The so-called jock tax is a three percent income tax on visiting professional athletes and those who live outside Pittsburgh as a “non-resident facility usage fee” for major sports venues that are publicly funded in the City: PNC Park (Pittsburgh Pirates), Heinz Field (Pittsburgh Steelers) and PPG Paints Arena (Pittsburgh Penguins).
However, residents of Pittsburgh who access and use the facilities only pay a one percent income tax.
This was the major objection of the lawsuit, as it labeled the taxes “unconstitutional.”
The plaintiffs cited the Pennsylvania Constitution’s provision that all taxes be “uniform,” arguing the City can’t levy different taxes on residents and non-residents, and furthermore, cite the U.S. Constitution’s text which “prohibits states and municipalities from establishing conditions on professional work that are more burdensome for non-residents than they are for residents.”
Wilson, who worked under a two-year deal with the Buffalo Sabres worth $2.1 million, paid a $6,000 tax to Pittsburgh in 2016.
Palmieri, in the middle of a five-year, $23 million contract with the Devils, paid $1,900 to the City in 2016.
Finally, Francoeur, who made $1 million playing for the Atlanta Braves in 2016, paid $800 of that sum to Pittsburgh that same year.
Lawyers for the players have successfully overturned similar taxes in other states, such as Ohio and Tennessee.
“The City of Pittsburgh, through its taxpayers, financed large portions of the facilities utilized by the plaintiff. Accordingly, it is reasonable for the City to seek remuneration for those expenditures, from the individuals who utilize the facilities,” according to a Jan. 21, 2020 answer in the litigation from the City Solicitor Yvonne S. Hilton and Associate City Solicitor, Michael E. Kennedy.
Hilton and Kennedy had referred to the City’s tax structure as “appropriate and legal” under state and federal law and added the non-individual plaintiffs lack standing to pursue their claims.
Additionally, the City officials believed the objecting plaintiffs did not pursue the matter in a timely fashion.
“To the extent that discovery reveals that any of the plaintiffs have failed to act in a timely basis, defendant asserts the appropriate statute of limitations as a defense,” Hilton and Kennedy said.
Pittsburgh Mayor Bill Peduto explained the rationale behind the tax created in 2005, during a time when the City was enduring difficult financial straits.
“The stadiums themselves have been paid for by taxpayers. They use them as their place of work. There was a way we felt that some of that money could be recouped for the public and we will let the judge decide,” Peduto stated.
Jay K. Reisinger, a partner at Pittsburgh-based Farrell Reisinger & Comber who manages the firm’s sports law practice and has extensive experience representing professional athletes, previously told the Pennsylvania Record that the tax is unconstitutional.
“In my opinion, it’s long overdue. Professional athletes, not just in Pittsburgh but in other jurisdictions, have been singled out for a so-called use tax or a licensing fee, etc., so that local municipalities that have stadiums and professional teams can charge those players,” Reisinger said.
“Everybody knows where the Steelers are playing, but you don’t know what lawyers from New York are coming into Pittsburgh to work there and earn money, that aren’t paying the same tax. So, what’s the difference? The difference is you can actually figure out where these [athletes] are, where they play and where they earn money.”
Plaintiff counsel filed a motion for summary judgment on Jan. 28, arguing that the tax in question violates both the Pennsylvania Constitution and the U.S. Constitution.
“Professional athletes pay state and local taxes throughout the country, understanding and satisfying their obligation to do so in each and every place the taxing authority has abided by the constitutional and statutory limits placed on its authority. Here, however, the City has exceeded those limits. The City’s facility fee is clearly a tax, designed to generate revenue and address a budget hole left by the City’s phasing out of a different tax,” the motion stated, in part.
“When properly considered as a tax, the facility fee must comply with the Uniformity Clause of the Pennsylvania Constitution, which requires that ‘all taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.’ It does not. The facility fee – whether or not it is a tax – must also comply with the relevant provisions of the United States Constitution, specifically the Privileges and Immunities, Due Process and Dormant Commerce Clauses. It does not. And finally, the facility fee must comply with the statutory requirement to follow the Department of Revenue’s Tax Guide. It does not.”
The plaintiffs said that “in light of all of these failings – apparent from the face of the City’s ordinances and regulations and confirmed by facts agreed to by the parties – this Court should grant plaintiffs’ summary judgment motion and declare the City’s facility fee unlawful.”
UPDATE
Allegheny County Court of Common Pleas Judge Christine A. Ward sided with the players on Sept. 21 and concurred that the figurative playing time of the “jock tax” had come to an end.
Ward found that the money “raises revenue for general purposes, it assesses a ‘fee’ against taxable income and the legislative purpose specifically mentions a goal in reducing a different tax.” The judge remarked, “The facility fee is a tax in function and should be recognized as such.”
“The facility fee is facially discriminatory, as it levies a three percent income tax against non-residents in comparison to a one percent income tax on residents, and there are discriminatory tax rates across the same occupation. Defendants assert that even if the fee were found to be a tax, it would be permissible as both residents and non-residents pay the same effective tax rate. Pittsburgh residents pay a two percent income tax towards Pittsburgh school districts, in addition to the one percent statutory tax on income by the city. However, defendants’ assertion is in error, and this does not remedy the difference in rates,” Ward stated.
“The two percent school tax is levied by the school board, not the city, and directly funds the schools whereas revenue from the facility fee is paid into the general fund. Defendants cannot find uniformity where a separate entity taxes residents for a separate purpose. Similarly, while Pittsburgh athletes pay a one percent tax on their income to the City, other Pennsylvania athletes pay a three percent tax on their income due to the facility fee. There is no permissible or rational basis for an unequal application of tax rates across residents and non-residents, and unequal application of tax rates across the same profession. With no rational basis for this discriminatory practice, the facility fee is a clear violation of the Uniformity Clause of the Pennsylvania Constitution.”
Ward granted the players’ motion for summary judgment and entered an injunction barring “any action by the City of Pittsburgh intended to assess, impose or collect the facility fee.”
The plaintiffs are represented by Scott R. Leah of Tucker Arensberg in Pittsburgh, plus Stephen W. Kidder, Ryan P. McManus and Michael P. Moore Jr. of Hemenway & Barnes, in Boston.
The defendants are represented by City Solicitor Yvonne S. Hilton and Associate City Solicitor Michael E. Kennedy, also in Pittsburgh.
Allegheny County Court of Common Pleas case GD-19-015542
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com