(1)
Statement of Purpose; Outline
of Topics; Effective Date.
(a)
Statement of Purpose. The purpose of 830 CMR 62.5A.2
is to explain the rules for the taxation of income received by non-resident
professional team athletes. The rules for the taxation of non-resident
professional non-team athletes are set forth in
830 CMR
62.5A.1.
(b)
Outline of Topics. 830 CMR 62.5A.2 is
organized as follows:
1. Statement of
Purpose; Outline of Topics; Effective Date
2. General Rule
3. Definitions
4. Examples
5. Alternative Apportionment Method
6. Composite Returns
7. No Tax Status
(c)
Effective Date.
The provisions of 830 CMR 62.5A.2 are effective for tax years beginning after
December 31, 2001.
(3)
Definitions. Unless the context requires otherwise,
for the purposes of 830 CMR 62.5A.2, the following definitions apply:
Authorized Return Signer, an
individual authorized by the qualified electing non-resident team members to
act as their agent in filing a composite tax return and estimated tax payments
and who signs the composite tax return, and who is a duly authorized officer of
the professional athletic team for which the qualified electing non-resident
team members perform their services.
Bonuses, remuneration earned as a
result of play (i.e., performance bonuses) during the season,
including remuneration paid for championship, playoff, or "bowl" games played
by a team, or for selection to all-star league or other honorary position; and
remuneration paid for signing a contract (i.e., signing
bonuses), unless all of the following conditions are met:
(a) the payment for 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.
Commissioner, the Commissioner of
Revenue, or the Commissioner's duly authorized representative.
Duty Days, all days, from the
beginning of the professional athletic team's official pre-season training
period through the last game in which the team competes or is scheduled to
compete during the taxable year. The term "duty days" shall also include game
days, practice days, days spent at team meetings, promotional "caravans" and
pre-season training camps, and days served with the team through all
post-season games in which the team competes or is scheduled to compete. The
term "duty days" is further defined as follows:
(a) For a member of a professional athletic
team who renders services for a team that does not fall within the
aforementioned period, such member's duty days shall include such additional
days. Examples of such services include participation in instructional leagues,
the "Pro Bowl," promotional "caravans," or representing the team at an all-star
game. Rendering a service includes conducting training and rehabilitation
activities on a day outside the period mentioned in 830 CMR 62.5A.2(3):
Duty Days, but only if conducted at the facilities of
the team.
(b) Duty days for any
person who joins a team during the season shall begin on the day such person
joins the team, and for any person who leaves a team shall end on the day such
person leaves the team. Where a person switches teams during a taxable year, a
separate duty day calculation shall be made for the period such person was with
each team.
(c) 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 such 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. Duty
days do not include any tryout or pre-season cut days that a player shall
survive in order to obtain a contract.
(d) Days for which a member of a professional
athletic team is on the disabled list, does not conduct rehabilitation
activities at facilities of the team in Massachusetts, and is not otherwise
rendering services for the team in Massachusetts, are presumed not to be duty
days spent in Massachusetts. However, all days on the disabled list shall be
included in total duty days spent within and without Massachusetts.
(e) 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 Massachusetts. However, such travel
days shall be considered in the total duty days spent both within and without
Massachusetts.
Member of a Professional Athletic Team
, includes, but is not limited to, 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, including coaches, managers, and trainers.
Non-resident, any natural person who
is not a resident or inhabitant. The term "resident" or "inhabitant" shall mean
any natural person domiciled in Massachusetts or any natural person not
domiciled in Massachusetts but who maintains a permanent place of abode in
Massachusetts and spends in the aggregate more than 183 days of the taxable
year in Massachusetts, including days spent partially in and partially out of
Massachusetts.
Professional Athletic Team, includes,
but is not limited to, any professional baseball, basketball, football, soccer
or hockey team.
Qualified Electing Non-resident Team
Member, a non-resident team member of a professional athletic team
seeking to file a composite return with other team members who meets all of the
following criteria:
(a) is a
non-resident for the entire taxable year;
(b) has no other Massachusetts source income,
and if married and filing jointly with his or her spouse, whose spouse has no
Massachusetts source income;
(c)
elects to be included in the composite return by signing the statement required
under 830 CMR 62.5A.2(6)(a);
(d)
has not filed a separate return in Massachusetts for the tax year in question;
and
(e) waives the right to claim
deductions, exemptions, and credits allowable under M.G.L. c. 62, §§
3, 5, and 6.
Team Member, a member of a
professional athletic team or the estate or trust of a deceased member of a
professional athletic team.
Total Compensation for Services, the
total compensation received by a non-resident team member during the taxable
year for services rendered:
(a) from
the beginning of the official pre-season training period through the last game,
including play-off games, in which the team competes or is scheduled to compete
during that taxable year; and
(b)
during the taxable year on a date which does not fall within the aforementioned
period (e.g., participation in instructional leagues, the "Pro
Bowl," promotional "caravans," or representing the team at an all-star game).
Such compensation shall include, but is not limited to, 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.
Such compensation shall not include strike benefits, severance pay, termination
pay, contract or option year buy-out payments, expansion or relocation
payments, or any other payments not related to services rendered to the
team.
(4)
Examples. The following examples illustrate the
application of 830 CMR 62.5A.2:
Example 1: Player A, a member of a
professional athletic team, is a non-resident of Massachusetts. Player A's
contract for such team requires A to report to such team's training camp and to
participate in all exhibition, regular season, and playoff games. Player A has
a contract which covers seasons that occur during year one year two and year
two year three. Player A's contract provides that A receive $500,000 for the
year one year two season and $600,000 for the year two year three season.
Assuming Player A receives $550,000 from such contract during taxable year two
($250,000 for 1/2 the year one year two season and $300,000 for 1/2
the year two year three season), the portion of such compensation received by
Player A for taxable year two, attributable to Massachusetts, is determined by
multiplying the compensation Player A receives during the taxable year
($550,000) by a fraction, the numerator of which is the total number of duty
days Player A spends rendering services for the team in Massachusetts during
taxable year two (attributable to both the year one year two season and the
year two year three season) and the denominator of which is the total number of
Player A's duty days spent both within and without Massachusetts for the entire
taxable year.
Example 2: Player B, a member of a
professional athletic team, is a non-resident of Massachusetts. During the
season, B is injured and is unable to render services for B's team. While B is
undergoing medical treatment at a clinic in Massachusetts, B's team, which is
not based in Massachusetts, travels to Massachusetts for a game. The number of
days B's team spends in Massachusetts for practice, games, meetings,
etc., while B is present at such clinic in Massachusetts shall
not be considered duty days spent in Massachusetts for Player B for that tax
year for purposes of 830 CMR 62.5A.2, but such days are considered to be
included within total duty days spent within and without Massachusetts.
Example 3: Player B, a member of a
professional athletic team, is a non-resident of Massachusetts. During the
season, B is injured and is unable to render services for B's team. B performs
rehabilitation exercises at the facilities of B's team in Massachusetts as well
as at personal facilities in Massachusetts. The days B performs rehabilitation
exercises in the facilities of B's team are considered duty days spent in
Massachusetts for Player B for that tax year for purposes of 830 CMR 62.5A.2.
However, the days B spends in private facilities in Massachusetts shall not be
considered duty days spent in Massachusetts for Player B for that tax year,
though such days are considered to be included within total duty days spent
within and without Massachusetts.
Example 4: Player C, a member of a
professional athletic team, is a non-resident of Massachusetts. During the
season, C travels to Massachusetts to participate in the annual all-star game
as a representative of C's team. The number of days C spends in Massachusetts
for practice, the game, meetings, etc., shall be considered
duty days spent in Massachusetts for Player C for that tax year for purposes of
830 CMR 62.5A.2, as well as included within total duty days spent within and
without Massachusetts.
Example 5: Assume the same facts as
given in Example 4, except that Player C is not participating in the all-star
game and is not rendering services for C's team in any manner. Player C is
traveling to and attending such game solely as a spectator. The days Player C
spends in Massachusetts for the game are not considered to be duty days spent
in Massachusetts. However, those days are included within total duty days spent
both within and without Massachusetts.
Example 6: Player D, a member of a
professional athletic team, is a non-resident of Massachusetts. During the
pre-season, D travels to Massachusetts to participate in a training camp which
D's team conducts in Massachusetts. D performs no further services in
Massachusetts. D's team does not play any regular season or playoff games in
Massachusetts. The days D spends in Massachusetts at the team's training camp
are considered to be duty days spent in Massachusetts for Player D for that
taxable year.
(5)
Alternative Apportionment Method. 830 CMR 62.5A.2 is
designed to apportion to Massachusetts, in a fair and equitable manner, the
total compensation for services of a nonresident member of a professional
athletic team rendered as a member of such team. It is presumed that
application of the foregoing provisions of 830 CMR 62.5A.2 will result in a
fair and equitable apportionment of such compensation. Where it is demonstrated
that the method provided under 830 CMR 62.5A.2 does not fairly and equitably
apportion such compensation, the Commissioner may require such member of a
professional athletic team to apportion such compensation under such method as
the Commissioner prescribes, as long as the prescribed method results in a fair
and equitable apportionment. A non-resident member of a professional athletic
team may submit a proposal for an alternative method to apportion such
compensation, where he or she demonstrates that the method provided under 830
CMR 62.5A.2 does not fairly and equitably apportion such compensation. If
approved, the proposed method must be fully explained in the personal income
tax return of the non-resident member of the professional athletic
team.
(6)
Composite
Returns. Any professional athletic team that has two or more
qualified electing non-resident team members may file a composite tax return as
an agent for the qualified electing non-resident team members.
(a)
Qualified Electing
Non-resident Team Member's Statement. Each qualified electing
non-resident team member must sign under penalties of perjury a statement
affirmatively stating such team member's qualifications and election to file a
composite return. The statement must include the following information:
1. the name and taxpayer identification
number of the professional athletic team;
2. the team member's taxpayer identification
number and the exact address of the team member's principal place of
residence;
3. an acknowledgment of
the team member's obligation to file a return, make estimated tax payments if
required, and pay the team member's pro rata share of any
penalty and interest due for any underpayment of estimated taxes;
4. a statement of waiver of the right to
claim any deductions, exemptions, and credits allowable under M.G.L. c. 62,
§§ 3, 5, and 6; and
5. a
power of attorney authorizing the authorized return signer to represent the
qualified electing non-resident team member in making, executing, and filing
the composite tax return, tax payments and estimated tax payments. Attaching a
properly completed Massachusetts Power of Attorney Form M-2848 to the qualified
electing non-resident team members' statement will fulfill the power of
attorney authorization requirement.
(b)
Composite
Returns. The composite return shall be filed on a Massachusetts
Nonresident Individual Income Tax Return (Form 1-NR/PY), with a composite
Massachusetts Schedule E-NR/PY attached. The authorized return signer shall
indicate clearly and conspicuously at the top of each form or schedule filed
that the form or schedule is a composite form or a composite schedule. The
total Massachusetts gross income reported on the composite Form 1-NR/PY shall
be the sum of all the qualified electing non-resident team members'
Massachusetts source professional athletic team income. Team members included
in the composite return filing must have the same taxable year.
(c)
Attachments. The
authorized return signer shall attach to the composite return:
1. a statement signed by the authorized
return signer under penalties of perjury, certifying that each qualified
electing non-resident team member included in the composite return has executed
a statement which meets the requirements of 830 CMR 62.5A.2(6)(a), that those
statements are on file at the professional athletic team's principal office and
the address of that office, and that the authorized return signer signing the
composite return is the authorized return signer authorized under power of
attorney to act as agent for the qualified electing non-resident team members
of the professional athletic team; and
2. a schedule of each qualified electing
non-resident team member's name, tax identification number, and Massachusetts
source professional athletic team income.
(d)
Composite Payments of
Estimated Tax. The composite payments of estimated tax shall be
made on Massachusetts Estimated Income Tax Vouchers (Form 1-ES). The authorized
return signer shall indicate clearly and conspicuously on the form that the
form is a composite estimated tax payment. Estimated tax payments made by
individual members of a professional athletic team cannot be credited against
tax due with the composite return. Individual members of a professional
athletic team who have made such payments with respect to a taxable year and
desire to participate in a composite return filing for that year, may request a
refund of their individual estimated tax payments. The request must be made in
writing to the Massachusetts Department of Revenue, Customer Service Bureau,
Attn: Composite Return Refund Request. The written request must state that the
taxpayer is electing to participate in a composite filing for the taxable year.
The professional athletic team filing the composite form must be clearly
identified by name, address and federal identification number. The application
will not be considered complete until the composite return is filed with the
Department. A copy of the composite return should be attached to the refund
request where available.
(e)
Extension of Time to File. The qualified electing
non-resident team members of a professional athletic team may request an
extension of time to file the composite return. An application for extension of
time to file a composite return must include a schedule listing the qualified
electing non-resident team members and their tax identification numbers. The
authorized return signer shall indicate clearly and conspicuously on the
application that the form is a composite application for extension of time to
file a Massachusetts composite income tax return. If granted, the extension of
time to file shall apply only to qualified electing non-resident team members
who were included in the application for an extension of time to file and are
included in the composite return.
(f)
Due Dates. The
following due dates apply to 830 CMR 62.5A.2(6):
1. To be included in a composite return, a
qualified electing non-resident team member must file the statement electing to
be included in the composite return with the professional athletic team before
the due date, without any extensions, of the composite return.
2. A composite return is due on the same date
that the return of an individual would be due, including extensions granted
under M.G.L. c. 62C, § 19.
3.
Composite payments of estimated tax are due on April
15th of the taxable year, June
15th of the taxable year, September
15th of the taxable year, and January
15th of the following taxable year.
(g)
Filing
Address. The authorized return signer shall mail the composite
return and composite payments of estimated tax in accordance with the filing
instructions for the Massachusetts Non-resident Individual Income Tax Return
(Form 1-NR/PY) and Massachusetts Estimated Income Tax Vouchers (Form 1-ES). The
authorized return signer must indicate clearly and conspicuously on each form
that it is a composite form.
(h)
Special Rules. 830 CMR 62.5A.2(6)(h)1. through 4.
applies to composite returns and composite payments of estimated tax:
1. The filing of the composite tax return and
composite payments of estimated taxes will be treated as satisfying the
obligation of each qualified electing non-resident team member to file a tax
return and to make estimated tax payments under M.G.L. c. 62C, § 6, and
M.G.L. c. 62B, § 13, respectively.
2. The authorized return signer is merely an
agent for the qualified electing nonresident team members of a professional
athletic team and each qualified electing nonresident team member is personally
responsible for timely filing of returns and payment of such team member's tax
liabilities. Nonresident members of a professional athletic team are subject to
the same requirements for filing tax returns and the same penalties for failure
to file or failure to pay their tax as other taxpayers.
3. A nonresident taxpayer has the right to
file an individual amended return. The Commissioner retains the right to
require the filing of an individual nonresident personal income tax return by
any of the qualified electing nonresident team members. This ordinarily will
not affect the validity of the original composite return for the taxable year
to which the individual return required by the Commissioner relates.
4. A professional athletic team may file an
amended composite return on behalf of electing qualified nonresident team
members only if it timely filed an original composite return on behalf of these
members under the provisions of 830 CMR 62.5A.2.
(7)
No Tax Status.
Massachusetts law provides that an individual's taxable income shall be exempt
from tax if his or her Massachusetts adjusted gross income for the taxable year
does not exceed $8,000. M.G.L. c. 62, § 5(a). Massachusetts adjusted gross
income includes the Massachusetts portion of a nonresident team member's total
compensation for services rendered. If a nonresident team member's
Massachusetts adjusted gross income is $8,000 or less, he or she does not owe
Massachusetts tax and should not sign a statement electing to file on a
composite basis. A nonresident team member will not receive no tax status if he
or she elects to be treated as part of a composite return.
