Ohio Supreme Court rules in favor of nonresident athletes against City of Cleveland.

• Author: Speece, Gregory

After more than a decade of debate, the Ohio Supreme Court mied in favor of professional athletes and their determination of taxable income within the city of Cleveland. In April 2015, the court found Cleveland incorrectly imposed its 2% local income tax on nonresident athletes' exterritorial income in two separate cases. In both cases, the plaintiffs argued against how Cleveland employed a "games played" formula to determine the taxable wages earned within its jurisdiction.

Hillenmeyer v. Cleveland Board of Revenue

The first case involved Hunter Hillenmeyer, a former linebacker for the Chicago Bears, who visited Ohio for two days each year during 2004-2006 to face the Cleveland Browns (Hillenmeyer v. Cleveland Bd. of Rev., No. 2014-0235 (Ohio 4/30/15)). The Central Collection Agency (CCA), which acts as the tax authority for the city of Cleveland, required income tax withholding on members of the visiting team under Cleveland Codified Ordinances Section 191.0501. The dispute arose when Hillenmeyer discovered a large portion of his income was subject to tax by Cleveland under the "games played" formula, despite specifications of his employment under the NFL standard player contract requiring him to perform various services during the pre- and post-season in addition to any games played.

Hillenmeyer challenged Cleveland's games-played formula, arguing that nonresident professional athletes were unjustly excluded from the more common "occasional entrant" grace period offered to employees in other industries. The occasional-entrant rules allowed workers to come into Cleveland for up to 12 days (in 2016, it increases to 20 days under Ohio Rev. Code Section 718.01(C)(17)) and not be subjected to Cleveland income tax withholding.

Under Cleveland's games-played formula, Hillenmeyer's total wages were multiplied by a formula that included the number of games in Cleveland over total games played for the year. In a nonplayoff year, this equated to 5% of his total wages (one game in Cleveland divided by 20 total regular season and preseason games).

This method was contrary to the widely accepted "duty days" allocation imposed on nonresident professional athletes in other states and cities. In fact, Cleveland is the only city to deviate from this method. Under the duty-days method, an athlete's total wages are multiplied by the number of days spent in a city over the total duty days in a calendar year. Duty days include games, practices, training camp...