OAR 150-316-0175: Gross Income of Nonresidents; Compensation Received by Nonresident Professional Athletes

(1)(a) General. Oregon source income of a nonresident 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 Oregon 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 Oregon during the taxable year. (b) Special rule. 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 Oregon. However, such travel days shall be considered duty days spent within and without Oregon. (2) Definitions. For purposes of this rule: (a) The term “professional athletic team” includes, but is not limited to, any professional baseball, basketball, football, soccer or hockey team. (b) The term “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 but is not limited to coaches, managers and trainers. (c)(A) The term “duty days” shall mean all days during the taxable year 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. (B) Duty days shall also include days on which a member of a professional athletic team renders a service for a team on a date which does not fall within the aforementioned period (e.g., participation in instructional leagues, the “Pro Bowl” or promotional “caravans”). Rendering a service includes conducting training and rehabilitation activities, but only if conducted at the facilities of the team. (C) Included within duty days, shall be 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. (D) 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 the taxable year, a separate duty day calculation shall be made for the period such person was with each team. (E) 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. (F) Days for which a member of a professional athletic team is on the disabled list shall be presumed not to be included in total duty days spent within and without the state. (G) The provisions of this paragraph can be illustrated by the following examples: Example 1: Kelly, a member of a professional athletic team, is a nonresident of Oregon. Kelly’s contract for such team requires Kelly to report to the team’s training camp and to participate in all exhibition, regular season, and playoff games. Kelly has a contract which covers seasons that occur during year 1/year 2 and year 2/year 3. Kelly’s contract provides that he will receive $500,000 for the year 1/year 2 season and $600,000 for the year 2/year 3 season. Assuming Kelly receives $550,000 from such contract during taxable year 2 ($250,000 for one-half the year 1/year 2 season and $300,000 for one-half the year 2/year 3 season), the portion of such compensation received by Kelly for taxable year 2, attributable to Oregon, is determined by multiplying the compensation Kelly receives during the taxable year ($550,000) by a fraction. The numerator of such fraction is the total number of duty days Kelly spends rendering services for the team in Oregon during taxable year 2 (attributable to both the year 1/year 2 season and the year 2/year 3 season). The denominator of such fraction is the total number of Kelly’s duty days spent both within and without Oregon for the entire taxable year. Example 2: Sam, a member of a professional athletic team, is a nonresident of Oregon. During the season, Sam is injured and is unable to render services for Sam’s team. While Sam is undergoing medical treatment at a clinic in Oregon, Sam’s team travels to Oregon for a game. The number of days Sam’s team spends in Oregon for practice, games, meetings, etc. while Sam is present at such clinic in Oregon shall not be considered duty days spent in Oregon for Sam for that tax year for purposes of this section, but such days are considered to be included within total duty days spent within and without Oregon. Example 3: Jean, a member of a professional athletic team, is a nonresident of Oregon. During the season, Jean is injured and is unable to render services for Jean’s team. Jean performs rehabilitation exercises at the facilities of Jean’s team in Oregon as well as at personal facilities in Oregon. Days Jean performs rehabilitation exercises in the facilities of Jean’s team are considered duty days spent in Oregon for Jean for that tax year for purposes of this section. However, days Jean spends in private facilities in Oregon shall not be considered duty days spent in Oregon for Jean for that tax year for purposes of this section, but such days are considered to be included within total duty days spent within and without Oregon. Example 4: Terry, a member of a professional athletic team, is a nonresident of Oregon. During the season, Terry travels to Oregon to participate in the annual all-star game as a representative of Terry’s team. The number of days Terry spends in Oregon for practice, the game, meetings, etc., shall be considered duty days spent in Oregon for Terry for that tax year for purposes of this section, as well as included within total duty days spent within and without Oregon. Example 5: Assume the same facts as given in example 4, except that Terry is not participating in the all-star game and is not rendering services for Terry’s team in any manner. Terry is traveling to and attending such game solely as a spectator. The number of days Terry spends in Oregon for such game shall not be considered duty days spent in Oregon for purposes of this section. (d)(A) The term “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: (i) from the beginning of the official pre-season training period through the last game in which the team competes or is scheduled to compete during that taxable year; and (ii) during the taxable year on a date which does not fall within the aforementioned period (e.g., participation in instructional leagues, the “Pro Bowl” or promotional “caravans”). Such compensation shall include, but is not limited to, salaries, wages, bonuses as described in subparagraph (B) of this paragraph 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. (B) For purposes of this paragraph, “bonuses” included in “total compensation for services rendered as a member of a professional athletic team” subject to the allocation described in subdivision (1)(a) of this section are: (i) Bonuses earned as a result of play (i.e., performance bonuses) during the season, including bonuses paid for championship, playoff or “bowl” games played by a team, or for selection to all-star league or other honorary positions; and (ii) Bonuses paid for signing a contract, unless all of the following conditions are met: (I) 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; (II) The signing bonus is payable separately from the salary and any other compensation; and (III) The signing bonus is nonrefundable. (iii) This section is designed to apportion to Oregon, 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 foregoing provisions of this section will result in a fair and equitable apportionment of such compensation. Where it is demonstrated that the method provided under this section does not fairly and equitably apportion such compensation, the Department of Revenue may require such member of a professional athletic team to apportion such compensation under such method as the department prescribes, as long as the prescribed method results in a fair and equitable apportionment. A nonresident member of a professional athletic team may submit a proposal for an alternative method to apportion such compensation, where they demonstrate that the method provided under this section does not fairly and equitably apportion such 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 Oregon.