R865. Tax Commission, Auditing.
R865-9I. Income Tax.
R865-9I-44. Compensation Received by Nonresident
Professional Athletes Pursuant to Utah Code Ann. Sections 59-10-116, 59-10-117,
and 59-10-118.
A. The Utah source income of a nonresident individual
who is a member of a professional athletic team includes that portion of the
individual's total compensation for services rendered as a member of a
professional athletic team during the taxable year which, the number of duty
days spent within the state rendering services for the team in any manner
during the taxable year, bears to the total number of duty days spent both
within and without the state during the taxable year.
B. Travel days that do not involve either a
game, practice, team meeting, promotional caravan or other similar team event
are not considered duty days spent in the state, but shall be considered duty
days spent within and without the state.
C. Definitions.
1. "Professional athletic team"
includes any professional baseball, basketball, football, soccer, or hockey
team.
2. "Member of a professional athletic
team" shall include those employees who are active players, players on the
disabled list, and any other persons required to travel and who do travel with
and perform services on behalf of a professional athletic team on a regular
basis. This includes coaches, managers,
and trainers.
3. "Duty days" means all days during
the taxable year from the beginning of the professional athletic team's
official preseason training period through the last game in which the team
competes or is scheduled to compete.
a) Duty days shall also include days on which a
member of a professional athletic team renders a service for a team on a date
that does not fall within the period described in 3., for example,
participation in instructional leagues, the Pro Bowl, or other promotional
caravans. Rendering a service includes
conducting training and rehabilitation activities, but only if conducted at the
facilities of the team.
b) Included within duty days shall be game
days, practice days, days spent at team meetings, promotional caravans, and
preseason training camps, and days served with the team through all postseason
games in which the team competes or is scheduled to compete.
c) Duty days for any person who joins a team
during the season shall begin on the day that person joins the team, and for a
person who leaves a team shall end on the day that person leaves the team. If a person switches teams during a taxable
year, a separate duty day calculation shall be made for the period that person
was with each team.
d) Days for which a member of a professional
athletic team is not compensated and is not rendering services for the team in
any manner, including days when the member of a professional athletic team has
been suspended without pay and prohibited from performing any services for the
team, shall not be treated as duty days.
e) Days for which a member of a professional
athletic team is on the disabled list shall be presumed not to be duty days
spent in the state. They shall,
however, be included in total duty days spent within and without the state.
4. "Total compensation for services
rendered as a member of a professional athletic team" means the total
compensation received during the taxable year for services rendered:
a) from the beginning of the official preseason
training period through the last game in which the team competes or is
scheduled to compete during that taxable year; and
b) during the taxable year on a date that does
not fall within the period in 4.a), for example, participation in instructional
leagues, the Pro Bowl, or promotional caravans.
5. "Total compensation" includes
salaries, wages, bonuses, and any other type of compensation paid during the
taxable year to a member of a professional athletic team for services performed
in that year.
a) Total compensation shall not include strike
benefits, severance pay, termination pay, contract or option-year buyout
payments, expansion or relocation payments, or any other payments not related
to services rendered to the team.
b) For purposes of this rule,
"bonuses" subject to the allocation procedures described in A. are:
(1) bonuses earned as a result of play during
the season, including performance bonuses, bonuses paid for championship,
playoff or bowl games played by a team, or for selection to all-star league or
other honorary positions; and
(2) bonuses paid for signing a contract, unless
all of the following conditions are met:
(a) the payment of the signing bonus is not
conditional upon the signee playing any games for the team, or performing any
subsequent services for the team, or even making the team;
(b) the signing bonus is payable separately from
the salary and any other compensation; and
c) the signing bonus is nonrefundable.
D. The purpose of this rule is to apportion to
the state, in a fair and equitable manner, a nonresident member of a
professional athletic team's total compensation for services rendered as a
member of a professional athletic team.
It is presumed that application of the provisions of this rule will
result in a fair and equitable apportionment of that compensation. Where it is demonstrated that the method
provided under this rule does not fairly and equitably apportion that
compensation, the commission may require the member of a professional athletic
team to apportion that compensation under a method the commission prescribes,
as long as the prescribed method results in a fair and equitable apportionment.
1. If a nonresident member of a professional
athletic team demonstrates that the method provided under this rule does not
fairly and equitably apportion compensation, that member may submit a proposal
for an alternative method to apportion compensation. If approved, the proposed method must be fully explained in the
nonresident member of a professional athletic team's nonresident personal
income tax return for the state.
E. Nonresident professional athletes shall keep
adequate records to substantiate their determination or to permit a
determination by the Tax Commission of the part of their adjusted gross income
that was derived from or connected with sources in this state.
F. Professional athletic teams shall file a
composite return, on a form prescribed by the commission, on behalf of
nonresident professional athletes that meet all of the following conditions.
1. Nonresident professional athletes included
on the return may not have other income from Utah sources. Resident professional athletes may not be
included on a composite return.
2. A schedule shall be included with the
return, listing all nonresident professional athletes included in the composite
filing. The schedule shall list all of
the following information for each nonresident professional athlete:
a) name;
b) address;
c) social security number;
d) Utah income attributable to that nonresident
professional athlete.
3. Nonresident professional athletes that are
entitled to mineral production tax withholding credits, agricultural off-highway
gas tax credits, or other Utah credits, may not be included in a composite
filing, but must file form TC-40NR, Non or Part-year Resident Individual Income
Tax Return.
4. Participating team members must acknowledge
through their election that the composite return constitutes an irrevocable
filing and that they may not file an individual income tax return in the taxing
state for that year.
G. The tax due on the composite return shall be
computed as follows.
1. A deduction equal to 15 percent of the Utah
taxable income attributable to nonresident professional athletes included in
the composite filing shall be allowed in place of a standard deduction,
itemized deductions, personal exemptions, federal tax determined for the same
period, or any other deductions.
2. The tax shall be computed using the maximum
tax rate applied to Utah taxable income attributable to Utah sources.
H. The professional athletic team's federal
identification number shall be used on the composite form in place of a social
security number.
I. This rule has retrospective application to
January 1, 1995.
Effective: 4/10/95