830 CMR, § 62.5A.2

Current through Register 1536, December 6, 2024

Section 62.5A.2 - Compensation Received by Non-resident Professional Team Athletes

(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.

(2)General Rule. The Massachusetts source income of a non-resident individual who is a member of a professional athletic team includes that portion of such 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 Massachusetts 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 Massachusetts during the taxable year.

(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 15^th of the taxable year, June 15^th of the taxable year, September 15^th of the taxable year, and January 15^th 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.

830 CMR, § 62.5A.2

Amended by Mass Register Issue 1417, eff. 4/21/2020.

Amended by Mass Register Issue 1428, eff. 10/16/2020.

Amended by Mass Register Issue 1438, eff. 12/8/2020.