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State Residency for Professional Athletes: Overview and Traps for the Unwary

Corey L. Rosenthal, JD
Published Date:
Dec 1, 2016

Fall is an amazing time of the year for sports fans. The NFL season is in full swing, the NBA and NHL seasons are beginning, and—of course—baseball’s World Series is played. As both sports enthusiasts and state and local tax professionals, we also focus on how professional athletes must report their taxes to various states.  

For individuals who reside in New York, for example, the question of residency for tax purposes is fairly straightforward. But for nonresident individuals—especially professional athletes—who live outside of New York and play within the state, the answer to the questions of residency and allocation of income can be surprising and, often, costly.

Undoubtedly, state taxing authorities who are currently facing extreme budgetary deficits are focusing on areas where they can add to their respective coffers during these challenging economic times. Given the compensation that many professional athletes are earning, it is not surprising that states target them to ensure they are properly filing state and local tax returns within their jurisdictions. The taxation of professional athletes has been referred to as the “jock” tax.

This article provides an overview of the residency and allocation rules—of which professional athletes and their respective tax advisors need to be aware—from a state and local tax prospective, with an emphasis on New York.

A Brief History of the Jock Tax

The taxing of professional athletes goes as far back as 1968, when it was first mentioned in an appeal brought before the State Board of Equalization in California. A San Diego Chargers football player owed taxes but was a nonresident taxpayer. The dispute was about how much income a state could claim was earned in their state by a nonresident professional athlete who played games in their state.

The California State Board of Equalization ruled that California could apportion the percentage of the petitioner’s “working days” that were spent in California to the petitioner’s annual salary, and then tax that income accordingly. This appeal essentially resulted in the first account of the apportionment method being applied to nonresident professional athletes.

In modern times, the more popular description of the jock tax is referred to as “Michael Jordan’s Revenge.” The origin of this dates back to 1991—when the Chicago Bulls, led by Michael Jordan, defeated the heavily favored Los Angeles Lakers in the NBA finals. In an apparent retaliation for the loss, California decided to levy state income tax against the salary earned in California that year by Michael Jordan and his teammates.

In response to taxing its sports hero, the Illinois legislature passed their own jock tax with a law that taxed only those professional athletes who played for a team whose home state taxed visiting athletes. Thus began “Michael Jordan’s Revenge”!

Since that time, every state imposing a personal income tax has implemented some form of jock tax. This should not shock anyone—states are constantly looking for additional tax revenue. Why not focus on wealthy nonresident individuals or professional athletes whose profession requires them to work or play in state whose laws they are unable to vote for or against?

New York State’s Apportionment of Income

Many states now have detailed personal income tax regulations or administrative pronouncements directly allocating the income of professional athletes. Under New York law, New York sourced income of a nonresident individual who is a member of a professional athletic team includes a portion of that individual’s total compensation for services. The individual’s compensation as a member of a professional athletic team during the taxable year is evaluated by the number of “duty days” spent within New York State rendering services for the team in any manner during the taxable year. Ultimately, New York law will recognize an income apportionment based on the number of duty days within New York versus duty days outside of New York. California also utilizes the duty days formula for professional athletes.

Duty days are calculated based on all-team work days, practices, team meetings, training camp, and exhibition games. The rules even apply to employees of the team who travel with the team and perform services on a regular basis. These might include the coaches and trainers. In this regard, New York’s rules conform to the rules recommended by the Federation of Tax Administrators—rules that are generally followed by most other states.

Does “Domicile” Play a Factor?

While there is no statutory definition of domicile in New York, the New York State Department of Taxation and Finance’s (DTF) regulations provide that a “domicile” is typically the place where an individual intends to have a permanent home—the place to which the individual intends to return whenever the individual might be absent. A domicile, once established, continues until the individual in question moves to a new location with the bona fide intention of making a fixed and permanent home there. For example, no change of domicile results from a move to a new location if the intention is to remain there only for a limited time. This rule applies even though the individual might have sold or disposed of his or her former home. The burden of proof is upon the person asserting the change of domicile to show that the necessary intentions existed. See here for the definition of “resident.”

An individual can have only one domicile. If a person has two or more homes, the individual’s domicile is the place that is regarded—and used as—a permanent home. When evaluating the domicile of a person with multiple homes, the length of time spent at each location and a comparison of the size of each home, its furnishings, and other factors are considered—but might not be conclusive.

As mentioned, an individual’s domicile is the place where the individual “intends” a permanent home. The DTF released its “Non-Resident Audit Guidelines” in June 2014, which publicizes five primary factors that are used to determine domicile. If the five primary factors are inconclusive, an auditor will then review an extended list of secondary factors that provide a framework for evaluating whether a reasonable conclusion can be established that an individual has changed their domicile. The five primary factors are:

  • Home: This factor refers to the number of residences owned or rented by the individual in a tax year. Consideration is taken with regards to the location, use, size, and value of each residence.
  • Time: This takes into account how the individual spends their time during the tax year in the state or city. The individual’s travel activity, lifestyle, and whether the person is retired or actively involved in a profession are also taken into consideration.
  • Items “near and dear”: This factor evaluates the location of the individual’s possessions, especially those with significant monetary or sentimental value. These might include family heirlooms and important papers and records.
  • Active business involvement: This considers the individual’s economic and financial activities, including how the individual earns a living and their involvement in any business ownerships or professions.
  • Family factors: The individual’s familial ties are considered if an analysis of the four principal factors is inconclusive.

Any individual trying to change their domicile should ensure they have taken the necessary steps to provide that they have made this change for personal income tax purposes. In the case of a professional athlete, unless he or she had previously viewed New York as their domicile, or subsequently moved into New York to play for a New York sports team, this issue might not have an impact. An example of a potential trap for the unwary professional athlete arose in the DTF’s case against legendary New York Yankee shortstop Derek Jeter. In 2007, DTF saw Jeter as an individual incorrectly reporting his personal income tax for his 2001 through 2003 tax years—specifically, Jeter had filed New York nonresident income tax returns claiming his off-season Tampa, Fla., residence as his primary one.  

The DTF challenged this domicile position partially based on the fact Jeter had acquired and maintained an apartment in Trump World Tower for a reported $13 million (“home” factor) and began spending holidays (“time” factor) there. He also filled that home with prized possessions and trophies (items “near” and “dear”). Ultimately, this matter was amicably settled.

In addition to potential domicile issues arising for professional athletes, it is not uncommon for professional athletes, irrespective of whether they are playing for a New York team, to maintain a permanent residence within New York State or New York City. The DTF can also assert that an individual is a “statutory tax resident” if the individual maintains a permanent place of abode in New York and spends more than 183 days in a state during a given tax year. This relatively straightforward set of criteria can become extremely complicated depending upon how the terms are defined. What defines an abode? What constitutes a day? Unsuspecting individuals—such as an executive who legally resides in Connecticut or New Jersey but works in New York and rents a small apartment in Manhattan for late nights at the office, a person who owns a rarely used vacation home located a few hours from their office, or the professional athlete who decides to spend the off-season in New York—can become a “statutory” resident and incur significant personal income tax liabilities as a result.

The DTF defines a “permanent place of abode” as “a dwelling place of a permanent nature maintained by the taxpayer, whether or not owned by such taxpayer, and will generally include a dwelling place owned or leased by such taxpayer's spouse. However, a mere camp or cottage, which is suitable and used only for vacations, is not a permanent place of abode . . . .”

It’s important to realize that New York has historically interpreted a permanent place of abode in extremely broad terms. These have ranged from the reasonable, such as ownership of a co-op or rental apartment, to the peculiar, such as having access to a dormitory-type room within a Catholic rectory.

Another interesting interpretation utilized by the audit division is illustrated by a recent decision by the New York Court of Appeals involving a New Jersey resident who operated a business in Staten Island. The taxpayer owned a three-unit apartment building in Staten Island and rented one of the apartments to his elderly parents. On occasion, he slept on the couch in his parent’s living room but kept no personal items there. Upon audit, the department determined this sporadic sleeping arrangement—for the sole purpose of caring for his parents—constituted a permanent place of abode.

As a result, this New Jersey resident was classified as a statutory resident of New York. He was deemed to be maintaining a permanent place of abode as he spent more than 183 days within the metropolitan area. Ultimately, in a unanimous decision, the highest court in New York State held that the taxpayer was not a New York resident for personal income tax purposes as he did not maintain a home within the state. As seen in a 2011 case, “intent” relating to the use of an abode is also not relevant, so if a New York nonresident has a vacation home in upstate New York, they have a permanent place of abode and the residency analysis will then turn to the “day count.”

Moreover, in counting the number of days spent within the state for purposes of the statutory resident test, presence for any part of the calendar day constitutes a day spent within the state. This presence might be disregarded if it is solely for the purpose of boarding a plane, train, ship or bus for travel outside of New York or while traveling through New York to a destination outside of the state. The DTF also has an exemption for a “medical day,” such that time spent in New York to receive medical treatment might not be deemed to be a New York day for residency purposes, although such a determination will still be fact-specific.

As noted above, the counting of days spent within New York is a critical element of the statutory residency test. If an individual is not domiciled in New York but maintains a permanent place of abode in the state for a “substantial” part of a calendar year, the individual will be considered a resident if he or she spends more than 183 days in New York during the year.

The department’s audit policy defines “substantial” to mean a period exceeding 11 months. For example, an individual who acquires a permanent place of abode on Mar. 15 and spends 184 days in New York would not be a statutory resident. This is due to the fact that the permanent place of abode was not maintained for substantially the entire year (he or she, however, might be classified as a “part-year” resident—a topic for another day). Similarly, if an individual maintains a permanent place of abode at the beginning of the year but disposes of it (or leases it in such a way that he or she no longer has access) on Oct. 30 of that tax year, that individual would not be a statutory resident—despite spending over 183 days in New York.

Any person who maintains more than one permanent place of abode should maintain books and records that substantiate their day-to-day whereabouts for the entire year. This would enable them to demonstrate the number of days spent within New York or, in the alternative, that the individual spent more than 183 days outside of New York. Unfortunately, any individual selected for a residency or domicile determination is, under most circumstances, presumed to be a New York resident unless they can prove otherwise. Ultimately, the burden of proof falls on the taxpayer to demonstrate his or her location on any given day—and to provide documentation in support of their claim.


Sports, professional athletes, and taxes—what a complicated mix! As states continue to expand their efforts to aggressively conduct residency audits—which include income allocation examinations—and pursue high-net-worth nonresidents, professional athletes will undoubtedly find themselves under audit scrutiny. Residency determinations can be extremely complex. And navigating through a residency audit can be a confusing, time-consuming, and costly trap for the unwary individual. CPAs and other tax advisors need to familiarize themselves with these state-specific rules to provide appropriate advice for those potentially affected.

rosenthalCorey L. Rosenthal, JD, is a principal in CohnReznick’s New York office and he leads the firm’s state and local tax (“SALT”) practice in its New York offices. Corey has more than 22 years of SALT experience, which includes income/franchise, sales and use, personal income, property, escheat, and employment-related tax issues. Corey has also been involved with multistate studies, restructuring of entities, and assistance with state audits from pre-audit planning through negotiations and protest. He has also developed stellar governmental relationships with the taxing authorities. He can be reached at

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