It felt groundbreaking when Shohei Ohtani did it with the Los Angeles Dodgers over a year ago. By the time Frank Vatrano did it with the Anaheim Ducks earlier this month, it was a certified California trend.
Athletes, like everyone else, don’t like paying taxes. California has a top marginal income tax rate of 13.3 percent, plus there’s the top federal rate of 37 percent, so high-earners like athletes are forking over a lot of hard-earned money. But if the team a player wants to sign with is in California, what can they do to avoid the state’s high taxes? As Ohtani and Vatrano have now done, they can defer the income until they likely won’t be living in the Golden State anymore. … The key to avoiding taxes on deferred payments is paying them out in equal amounts over at least a decade. “A 1996 federal law forbids states from taxing retirement income on out-of-state residents when payments are made in ‘substantially equal periodic’ amounts over at least 10 years,” The Athletic‘s Evan Drellich explained.
Those deferred payments won’t just help athletes avoid taxes—they might help ease the pain felt by franchises in high-tax states when they’re negotiating with players in free agency.
Plenty of factors go into a free agent athlete’s decision on where to sign: taxes, cost of living, and climate, not to mention team-related factors. But research has shown state income taxes really do hold back teams in high-tax states. … Read More
The NCAA used to bar all college athletes from making money off their names, images, and likenesses. But since a 2021 rule change, they have been eligible to earn money through endorsement deals, social media activity, and paid appearances. The NCAA had long viewed college athletes as amateurs, but the policy change—quite sensibly—recognized that students deserved to be paid as professionals. In the first year of name, image, and likeness arrangements, Opendorse, a technological platform for these deals, estimated that college athletes made $917 million. Three-quarters of all NCAA athletes had engaged in the market from July 2021 to July 2022.
But international students largely operate in “a gray zone” in American immigration law when it comes to endorsements, says James Hollis, an immigration attorney at Siskind Susser, PC who has previously advised professional sports organizations on visa matters. “Students, schools, and their lawyers are all operating within the standard student visa framework,” Hollis tells Reason. College athletes are largely in the U.S. on F-1 visas, which place tough restrictions on work. “The student visa rules say that student athletes can work part time on campus, can work if authorized as part of the curriculum…and can work after one academic year if they can demonstrate they’re experiencing economic hardship,” says Hollis.
None of that fits neatly into the name, image, and likeness apparatus. “Some foreign student athletes have been able to obtain O-1 extraordinary ability visas authorizing them to work, study, and compete,” says Hollis. Others have arranged completely “passive deals where they receive income but do nothing that could be considered work while in the United States.” According to Hollis, “the safest path has been to sign deals and then do the work to promote the NIL [name, image, and likeness] content” strictly while outside the United States.
Two years after the NCAA rule change, the Biden administration still hasn’t offered definitive guidance that would allow foreign college athletes to make money like their native-born peers. On a more basic level, this leaves foreign athletes wondering whether certain activities might be violations of their student visa terms.
According to ESPN, just one of the eight teams that played in the men’s and women’s Final Fours didn’t have at least one international student player. UConn has four. Per the NCAA, “roughly one out of every eight athletes across all Division I sports is from a foreign country,” leaving a gaping hole in the system that allows student-athletes to sign often lucrative sponsorship deals. Visa term violations can be dire—potentially as severe as deportation….Read More
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