January 13, 2025 • 17 mins
Juan Soto's monster contract with the New York Mets raises questions regarding his tax liability in New York. While he works for a New York team, the intricacies of his contract - notably his $75 million signing bonus - are out of the hands of the New York taxman. How does this happen? Check out our latest episode with one of our frequent guests - tax expert Robert Raiola, who has worked with over 100 professional athletes across the five major sports. He dives into how Soto's contract is structured and why he does not have to pay one cent of his bonus to New York. Tune in for a fascinating discussion!
Host: Mark Conrad Producer: Victoria Ilano Additional Production: Jeffrey Haynes Artwork: Pamela V. White Marketing: Michelle Miller Music: ”MarcusWay/Energetic Pop Punk/Tribe of Noise”
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:07):
Hello and welcome to the
Sports Business Podcastwith Prof C, the podcast
that explores the world of professional,collegiate, amateur, and Olympic sports.
I’m Mark Conrad, or Prof.
C from Fordham University’s Gabelli Schoolof Business, where I serve as Professor
(00:29):
of Law and Ethics and the Directorof the Sports Business Initiative.
As many of you know, Juan Soto,
probably the most coveted baseball freeagent in the offseason,
jumped from one New York Cityteam to another,
signing a 15-year $765
(00:51):
million contractto play for the New York Mets.
He jumped from the New York Yankees,where he played last season,
and helped lead his teamto the American League pennant.
But he will be a Met and playhis home games at Citi Field in Queens,
and Mets fans are hopinghe will lead the team
(01:11):
to its first WorldSeries title in 38 years.
The contract has an
average annual value of $51 million.
It contains an opt out clause
if Soto wishes to test the free agencymarket after five seasons
and a signing bonus of $75 million.
(01:34):
It is the signing bonusand its tax considerations
that will be the focus of this episode.
And with us to explain the tax issues
is one of our most popularguests, the tax expert Robert Raiola.
Many of you know and are familiarwith Robert from previous podcasts.
And if you are not,I would urge you to listen to them.
(01:58):
Check out Season 1 Episodes 5
and 6 on January 22nd and February13th, 2024,
which are foundby searching our Podbean page.
That's fordhamgsb.podbean.com.
I'll spell that out (02:16):
Fordham
F-O-R-D-H-A-M-G-S-B.podbean.com.
Robert
is the Director of the Sportsand Entertainment Group
in the firm of PKF O'Connor Daviesin Cranford, New Jersey.
He has 30 years of experiencein both the public and private sector,
(02:40):
and has worked with over 100 professionalathletes in the five major sports.
Robert, welcome back to the SportsBusiness Podcast.
Thank you, Mark.
Happy New Yearand a pleasure to be with you.
And Happy New Year to you.
So let's talk about this massive contract.
Unlike the deal between Shohei Ohtani
and the Dodgers, Soto'ssalary is not deferred.
(03:04):
So the Mets will have to shell outabout the same amount
each season for the life of the contract.
So, Robert, am I correct insaying that Soto will have to pay
New York Stateand New York City taxes from his income?
I'm not 100% correct.
He will pay New York State tax,but he won't pay New York City tax
(03:25):
because New York City is only taxing
players or people, executivesthat are residents.
So he beats the 4% because he's nota resident of New York City.
It's been reportedthat he is a resident of Florida.
That's interesting.
So now he is a resident of Florida.
So that adds something to the mix,doesn't it?
[Raiola (03:43):
Yes.] So being a resident of Florida, he would save
4% of his income per year for the [Raiola: the whole contract.] life [Raiola (03:47):
Yes].
Right.
But now let's talk about thatsigning bonus because
$75 million is not chicken feet.
And does he have to pay the 4%
on the $75 million signing bonus?
He does not have to pay the 4% on the $75million signing bonus.
(04:11):
Also, he would not pay any state taxeseverywhere.
The jock tax and the New York State tax.
The top rate in New York State is 10.9%.
So if you multiplythat by the size of the bonus,
which you correctly alluded to,75 million,
that's $8.2 millionhe saves by receiving a signing bonus.
Now, one might saywhy not get a higher bonus?
(04:33):
But that's what Boras got for him,
and Boras did a good jobmaking sure that was done the proper way.
When you say the proper way,
you say it was not possibleto get a higher signing bonus.
I'm not sure it wasn’t possible.
I wasn't privy to the negotiations,but that's what he negotiated.
I think he's going to get the bonussometime soon.
(04:53):
I think he intentionally didn'ttake it in December or November this year.
He's in the top bracket either way,
but maybe he did want to turn aroundand pay the tax instantaneously.
Used to be in the old days that they usedto report the bonuses as 1099,
which he's used to be ableto take expenses against.
That’s no longer the case,but the signing bonus works.
(05:14):
I'm sure you'll see it onPete Alonso's deal when he signs, who’s
also reported to be a Florida resident.
Just for
those who may not know, 1099income is not the same
as what's called W-2 wage income
and 1099 income from most of usmortals is usually something
that's freelance workor a business on the side.
(05:35):
So let's say I'm working with Robert.
Robert says, “hey,can you put together a conference for me?
It's a one time thing and I'm paying youX dollars.” They'll be on the 1099 form.
And then you can take expenses becauseit becomes something like a business.
I don't want to usurp your expertise,but that's, you know, the way
I'd understand it. Very good. Ron.
(05:55):
You know, please let me know.
No good explanation.
But to actually put that as a 1099would have been very interesting.
But I guess that is no longer the case.
The other situation is, professor, beingthat the players are now on their W-2,
they can't deduct the agent feepaid on the contract.
I think I read somewhere where Boraswill make 38 million off this contract.
(06:18):
Soto will get zero deduction for that.
You are allowed, however,to take a business
expense for agent fees paidagainst his endorsement income,
his gloves,his batting gloves, his spikes.
You know, all that kind of stuff.
He's allowed to take that fee.
But the loss of the agent fee,you know, you're paying 38 million
and you got a great contract,
(06:38):
but you're not getting a deductionfor the 38 million.
And that's a lot of deductions,no question about it.
So it goes to show you that, you know,the interpretation and the technicality of
this is not just for,you know, people who are into accounting.
It actually has a huge effecton employees on that level.
Of course, [Raiola (06:56):
Yup] young professional athletes,
you know, on an elitelevel are one of those types of employees.
But it also opens up the general questionof, you know, let's call it forum living.
So if you're a professional athlete,what state
would you recommend the athlete live in,
at least for most of the yearwhen he or she's not playing?
(07:18):
Right.
There's there's about 6 or 7 statesthat don't have a state tax.
Most recently - which state was it?
One of the states changed the rule.
But Nevada doesn't have a state tax.
State of Washingtondoesn't have a state tax.
Obviously, Florida,
Washington D.C., similar to New York City,only taxes residents.
(07:38):
You really got to live there.
In other words, Soto, when he's doneplaying, hopefully late in October
with the Mets in the World Series, he'sgot to get out of New York City
to be below the 183 day count,meaning if he spends
more than 183 days in New York,he would be deemed to be a resident.
Now, the good thing for him,they spend a lot of time on the road
so that time counts out of New York Stateor New York City.
(08:01):
So he wouldn't have a problemwith the day count.
Even if they go far,
he's still going to have half ofthose six months will be on the road.
And not only that, but spring training,of course, is not gonna be in NY.
Exactly, Mark.
And that's a good amount of days.
And you think about how often 81 gamesworth, a baseball player is on the road.
So he wouldn't make thatdomicile argument.
(08:23):
He wouldn't be able to get that,you know, 100,
whatever, 80 days a yearbeing in New York or New York City.
So that makes it easier.
And do you find thatbased on your experience, more and more
professionalathletes are moving to Florida
or Texas or Arizona? Yup.
I think you saw Corbin Burnes just signed
(08:45):
with Arizona,coincidentally has a low tax.
2.5% is a flat rate.
But also he's from Arizona
and he's got his family thereand he didn't want to move his family.
So maybe one of the other teamslike Toronto or whoever else was involved
in discussions with him,maybe they offered more money.
But I've also said on your show,Mark, the best gross deal
(09:07):
may not be the best net deal,meaning that he may have been offered
more by the Blue Jays and other teams,but he decided to take
or look at the best net dealand and don't - you know, it's
not a small thing that he'd be ableto not have to move his family.
And back to the bonuses though,why don't more players and more leagues
(09:28):
utilize this bonus system as a way
to limit tax liability?
They should, Mark.
I think what it is, iswhen you sign a contract
as big as Soto did, 15 for $765million, you know,
whatever signing bonus you could get,somebody is going to put out there.
A lot of guys on the one year deal,
(09:50):
they maybe get a small signing bonus,but it's not publicized.
I think more and more athletesare going to move to Florida
and to try to take advantageof not being taxed
as a resident inthe state in which they play.
And that could also be Texas [Raiola (10:04):
Yup] and also could be Arizona.
So the so called low tax statesor so called [Raiola: Right] red states
will be even more attractive in the future
as these kinds of moneysare just being paid to athletes.
Yeah.
You mentioned spring training, Mark,what would happen there was
Arizona wanted a couple of teamsto move from Florida spring training
(10:27):
to Arizona spring training.
So they negotiated with Arizonato say, look, you can't tax our guys
during spring training.
You can tax and during the seasonwhen they play there,
but not during spring training.
And they agreed to do that
because they know it would be worthwhilefor their teams to come out to Arizona.
So basically we're seeing thistrend happening, but in other leagues,
(10:48):
we should talk about some ofthe restrictions on the signing bonuses,
and if you think in the futurethat could change.
Not every leagueallows the kind of signing bonus
that Major League Baseball does. Right.
So the NHL does allow the signing bonus,and you can use the same technique.
The most recent was the Rangergoalie Shesterkin.
(11:10):
He signed a huge contract,and I'm sure he got a big signing bonus.
So he would take it out of New York.
I'm sure I would bethe's not a New York resident.
The NBA doesn't allow signing bonuses.
I don't understand why.
Because when guys get drafted,they're not - they don't have much money
when they're drafted.
So what happens is they take an advance,which is really a signing bonus,
(11:32):
you know, in the summertime.
So that they’re good until October;hopefully good until October.
And then NFL,
it doesn't work‘cause the language in the contract.
All right.
And the whole systemthe NFL has is really unique,
and extremely intricateand difficult to implement.
So we can see that.
But could you see in the futurethat this could be a very attractive way
(11:56):
to save on taxes? It is.
And it sort of would equalizethe teams like
the California teamsthat play in the high tax.
Hey, you got to remember,Mark, in the NFL,
if you play if you play in a taxable state
and you get wages,you're on a home game that weekend.
You're paying tax on all thatweek's pay to California.
(12:19):
If you got a road game you're still payingtaxes on 5/7 of the week to California.
So that's a big disadvantageto the California teams.
And oftenyou see, when these big contracts,
guys will try to get out of the statethat they're playing in.
And that's somethingthat's not really publicized.
But do you think that a factorinvolving, say, football players
(12:39):
in signing with different teamscan be the tax consequences?
I think it is.
It's not number one on the list,
but it certainly should be part ofyour list of concerns that you may have.
And if you're not doing that,you're making a mistake
because you least want to be able
to use that against a teamthat's in a taxable state
and try to get awayto move up their offer to you
(13:00):
by getting more moneyto make up for the high tax state.
Now, when a client would come to youregarding taxes,
is it really proactive or after the fact?
Because what you're saying
could be very good advice in working,say with an agent or not?
Or if the players said, look, I nowplay for the Jets or I play for the Mets,
you know, here's my taxes,do my taxes, please.
(13:24):
You know, it's a fait accompli.
So how do you see someone like you
in your role evolving in this environment?
Sure.
We did recently, two years ago,a player on the Denver Broncos.
What happened was
he was with the Arizona Cardinals,and he wanted to sign somewhere else.
Now Arizona,Arizona didn't have the money to pay him.
(13:44):
So he wound up signing in Colorado,which got a 4% tax, much better
than where he was from in Connecticut,which I think is about seven.
So I do see this evolving more and more.
What we alluded to, but we didn'tget into, Mark, is you have to have three
conditions present for the signing bonusto be taxable in the right fashion.
It's got to be payableseparately from salary.
(14:05):
It always is. It'sgot to be nonrefundable.
It should be.
And it's not predicatedupon subsequent performance,
which is where football trips up.
[Conrad (14:14):
Correct.] But if you have those three conditions present
and it may not be in the uniform contractin any sport,
but you should be able to addthat paragraph in as an addendum.
Yeah. Great points, great points.
Anything else you'd like to sayabout Soto’s contract or anybody
else's contract?
I think you really - it's fun for us
when we get involved in negotiationsbefore the player signs.
(14:36):
So again,he may have been looking at the Blue Jays
and when you look at the Blue Jays,you got to first consider the US
Canadian treaty.
Regular wages are taxable in Canada,Province of Toronto,
Ontario, at 53.53%, which is ludicrous.
It's it's that's really the federal state,but it's still very high.
It beats all U.S.
(14:57):
rates except for California.
And then pursuant to the US Canadiantreaty,
signingbonuses are only taxed at 15% in Canada.
So then you would get the full creditof the US for the 15%
and not get screwedby playing up in Canada.
But nevertheless,that Ontario tax is very high.
[Raiola (15:15):
Yes, it is.] The provincial tax and also in Quebec, I should say, as well,
where there's many Canadians saythat funds their medical system
to a great extent,the more state run medical system.
But it is very high for US players.
And also they are paid in US dollars,
at least in the [Raiola (15:34):
Right.] National Hockey League.
So that part is settled so we don't haveto worry about the exchange rate.
But I suspect that, yeah,many of the agents
[...] working with people likeyou are calculating this for the future
where seeing this continuedspiral of free agents’ salaries,
and in the National HockeyLeague will probably go up, too,
(15:54):
because the salary cap is going to go upfairly substantially.
Right.
And I don't have the exact numberson Shesterkin, but I know
a great portion of his contractevery year was deemed to be signing bonus.
So that's clearly,to me, doing two things.
One, if there ever was a lockout,you still got to get paid.
But second of all, you know, equallyas important is that you were able to move
(16:17):
those wages outside of New York Statein New York City, which is a big savings.
And I would bet you he’sa resident of a non taxing state.
Okay. Sounds great.
And on that note, on behalf of FordhamUniversity, the Gabelli School of Business
and the Sports Business Initiative,we want to thank you,
Robert Raiola, for again coming on
(16:38):
to share your expertise on this podcast,and you're welcome to come back
any time in the future to discussany other issues that may come up.
Thanks for having me, professor.
And thanks to my producer, Victoria Ilano,for her continued great work.
And thanks to all of you for listening in.
For the Sports Business Podcastat Fordham's
Gabelli School of Business,I’m Mark Conrad or Prof.
(17:02):
C, have a great day.
Hello and welcome to the
Sports Business Podcastwith Prof C, the podcast
that explores the world of professional,collegiate, amateur, and Olympic sports.
I’m Mark Conrad, or Prof.
C from Fordham University’s Gabelli Schoolof Business, where I serve as Professor
(00:29):
of Law and Ethics and the Directorof the Sports Business Initiative.
As many of you know, Juan Soto,
probably the most coveted baseball freeagent in the offseason,
jumped from one New York Cityteam to another,
signing a 15-year $765
(00:51):
million contractto play for the New York Mets.
He jumped from the New York Yankees,where he played last season,
and helped lead his teamto the American League pennant.
But he will be a Met and playhis home games at Citi Field in Queens,
and Mets fans are hopinghe will lead the team
(01:11):
to its first WorldSeries title in 38 years.
The contract has an
average annual value of $51 million.
It contains an opt out clause
if Soto wishes to test the free agencymarket after five seasons
and a signing bonus of $75 million.
(01:34):
It is the signing bonusand its tax considerations
that will be the focus of this episode.
And with us to explain the tax issues
is one of our most popularguests, the tax expert Robert Raiola.
Many of you know and are familiarwith Robert from previous podcasts.
And if you are not,I would urge you to listen to them.
(01:58):
Check out Season 1 Episodes 5
and 6 on January 22nd and February13th, 2024,
which are foundby searching our Podbean page.
That's fordhamgsb.podbean.com.
I'll spell that out (02:16):
Fordham
F-O-R-D-H-A-M-G-S-B.podbean.com.
Robert
is the Director of the Sportsand Entertainment Group
in the firm of PKF O'Connor Daviesin Cranford, New Jersey.
He has 30 years of experiencein both the public and private sector,
(02:40):
and has worked with over 100 professionalathletes in the five major sports.
Robert, welcome back to the SportsBusiness Podcast.
Thank you, Mark.
Happy New Yearand a pleasure to be with you.
And Happy New Year to you.
So let's talk about this massive contract.
Unlike the deal between Shohei Ohtani
and the Dodgers, Soto'ssalary is not deferred.
(03:04):
So the Mets will have to shell outabout the same amount
each season for the life of the contract.
So, Robert, am I correct insaying that Soto will have to pay
New York Stateand New York City taxes from his income?
I'm not 100% correct.
He will pay New York State tax,but he won't pay New York City tax
(03:25):
because New York City is only taxing
players or people, executivesthat are residents.
So he beats the 4% because he's nota resident of New York City.
It's been reportedthat he is a resident of Florida.
That's interesting.
So now he is a resident of Florida.
So that adds something to the mix,doesn't it?
[Raiola (03:43):
Yes.] So being a resident of Florida, he would save
4% of his income per year for the [Raiola: the whole contract.] life [Raiola (03:47):
Yes].
Right.
But now let's talk about thatsigning bonus because
$75 million is not chicken feet.
And does he have to pay the 4%
on the $75 million signing bonus?
He does not have to pay the 4% on the $75million signing bonus.
(04:11):
Also, he would not pay any state taxeseverywhere.
The jock tax and the New York State tax.
The top rate in New York State is 10.9%.
So if you multiplythat by the size of the bonus,
which you correctly alluded to,75 million,
that's $8.2 millionhe saves by receiving a signing bonus.
Now, one might saywhy not get a higher bonus?
(04:33):
But that's what Boras got for him,
and Boras did a good jobmaking sure that was done the proper way.
When you say the proper way,
you say it was not possibleto get a higher signing bonus.
I'm not sure it wasn’t possible.
I wasn't privy to the negotiations,but that's what he negotiated.
I think he's going to get the bonussometime soon.
(04:53):
I think he intentionally didn'ttake it in December or November this year.
He's in the top bracket either way,
but maybe he did want to turn aroundand pay the tax instantaneously.
Used to be in the old days that they usedto report the bonuses as 1099,
which he's used to be ableto take expenses against.
That’s no longer the case,but the signing bonus works.
(05:14):
I'm sure you'll see it onPete Alonso's deal when he signs, who’s
also reported to be a Florida resident.
Just for
those who may not know, 1099income is not the same
as what's called W-2 wage income
and 1099 income from most of usmortals is usually something
that's freelance workor a business on the side.
(05:35):
So let's say I'm working with Robert.
Robert says, “hey,can you put together a conference for me?
It's a one time thing and I'm paying youX dollars.” They'll be on the 1099 form.
And then you can take expenses becauseit becomes something like a business.
I don't want to usurp your expertise,but that's, you know, the way
I'd understand it. Very good. Ron.
(05:55):
You know, please let me know.
No good explanation.
But to actually put that as a 1099would have been very interesting.
But I guess that is no longer the case.
The other situation is, professor, beingthat the players are now on their W-2,
they can't deduct the agent feepaid on the contract.
I think I read somewhere where Boraswill make 38 million off this contract.
(06:18):
Soto will get zero deduction for that.
You are allowed, however,to take a business
expense for agent fees paidagainst his endorsement income,
his gloves,his batting gloves, his spikes.
You know, all that kind of stuff.
He's allowed to take that fee.
But the loss of the agent fee,you know, you're paying 38 million
and you got a great contract,
(06:38):
but you're not getting a deductionfor the 38 million.
And that's a lot of deductions,no question about it.
So it goes to show you that, you know,the interpretation and the technicality of
this is not just for,you know, people who are into accounting.
It actually has a huge effecton employees on that level.
Of course, [Raiola (06:56):
Yup] young professional athletes,
you know, on an elitelevel are one of those types of employees.
But it also opens up the general questionof, you know, let's call it forum living.
So if you're a professional athlete,what state
would you recommend the athlete live in,
at least for most of the yearwhen he or she's not playing?
(07:18):
Right.
There's there's about 6 or 7 statesthat don't have a state tax.
Most recently - which state was it?
One of the states changed the rule.
But Nevada doesn't have a state tax.
State of Washingtondoesn't have a state tax.
Obviously, Florida,
Washington D.C., similar to New York City,only taxes residents.
(07:38):
You really got to live there.
In other words, Soto, when he's doneplaying, hopefully late in October
with the Mets in the World Series, he'sgot to get out of New York City
to be below the 183 day count,meaning if he spends
more than 183 days in New York,he would be deemed to be a resident.
Now, the good thing for him,they spend a lot of time on the road
so that time counts out of New York Stateor New York City.
(08:01):
So he wouldn't have a problemwith the day count.
Even if they go far,
he's still going to have half ofthose six months will be on the road.
And not only that, but spring training,of course, is not gonna be in NY.
Exactly, Mark.
And that's a good amount of days.
And you think about how often 81 gamesworth, a baseball player is on the road.
So he wouldn't make thatdomicile argument.
(08:23):
He wouldn't be able to get that,you know, 100,
whatever, 80 days a yearbeing in New York or New York City.
So that makes it easier.
And do you find thatbased on your experience, more and more
professionalathletes are moving to Florida
or Texas or Arizona? Yup.
I think you saw Corbin Burnes just signed
(08:45):
with Arizona,coincidentally has a low tax.
2.5% is a flat rate.
But also he's from Arizona
and he's got his family thereand he didn't want to move his family.
So maybe one of the other teamslike Toronto or whoever else was involved
in discussions with him,maybe they offered more money.
But I've also said on your show,Mark, the best gross deal
(09:07):
may not be the best net deal,meaning that he may have been offered
more by the Blue Jays and other teams,but he decided to take
or look at the best net dealand and don't - you know, it's
not a small thing that he'd be ableto not have to move his family.
And back to the bonuses though,why don't more players and more leagues
(09:28):
utilize this bonus system as a way
to limit tax liability?
They should, Mark.
I think what it is, iswhen you sign a contract
as big as Soto did, 15 for $765million, you know,
whatever signing bonus you could get,somebody is going to put out there.
A lot of guys on the one year deal,
(09:50):
they maybe get a small signing bonus,but it's not publicized.
I think more and more athletesare going to move to Florida
and to try to take advantageof not being taxed
as a resident inthe state in which they play.
And that could also be Texas [Raiola (10:04):
Yup] and also could be Arizona.
So the so called low tax statesor so called [Raiola: Right] red states
will be even more attractive in the future
as these kinds of moneysare just being paid to athletes.
Yeah.
You mentioned spring training, Mark,what would happen there was
Arizona wanted a couple of teamsto move from Florida spring training
(10:27):
to Arizona spring training.
So they negotiated with Arizonato say, look, you can't tax our guys
during spring training.
You can tax and during the seasonwhen they play there,
but not during spring training.
And they agreed to do that
because they know it would be worthwhilefor their teams to come out to Arizona.
So basically we're seeing thistrend happening, but in other leagues,
(10:48):
we should talk about some ofthe restrictions on the signing bonuses,
and if you think in the futurethat could change.
Not every leagueallows the kind of signing bonus
that Major League Baseball does. Right.
So the NHL does allow the signing bonus,and you can use the same technique.
The most recent was the Rangergoalie Shesterkin.
(11:10):
He signed a huge contract,and I'm sure he got a big signing bonus.
So he would take it out of New York.
I'm sure I would bethe's not a New York resident.
The NBA doesn't allow signing bonuses.
I don't understand why.
Because when guys get drafted,they're not - they don't have much money
when they're drafted.
So what happens is they take an advance,which is really a signing bonus,
(11:32):
you know, in the summertime.
So that they’re good until October;hopefully good until October.
And then NFL,
it doesn't work‘cause the language in the contract.
All right.
And the whole systemthe NFL has is really unique,
and extremely intricateand difficult to implement.
So we can see that.
But could you see in the futurethat this could be a very attractive way
(11:56):
to save on taxes? It is.
And it sort of would equalizethe teams like
the California teamsthat play in the high tax.
Hey, you got to remember,Mark, in the NFL,
if you play if you play in a taxable state
and you get wages,you're on a home game that weekend.
You're paying tax on all thatweek's pay to California.
(12:19):
If you got a road game you're still payingtaxes on 5/7 of the week to California.
So that's a big disadvantageto the California teams.
And oftenyou see, when these big contracts,
guys will try to get out of the statethat they're playing in.
And that's somethingthat's not really publicized.
But do you think that a factorinvolving, say, football players
(12:39):
in signing with different teamscan be the tax consequences?
I think it is.
It's not number one on the list,
but it certainly should be part ofyour list of concerns that you may have.
And if you're not doing that,you're making a mistake
because you least want to be able
to use that against a teamthat's in a taxable state
and try to get awayto move up their offer to you
(13:00):
by getting more moneyto make up for the high tax state.
Now, when a client would come to youregarding taxes,
is it really proactive or after the fact?
Because what you're saying
could be very good advice in working,say with an agent or not?
Or if the players said, look, I nowplay for the Jets or I play for the Mets,
you know, here's my taxes,do my taxes, please.
(13:24):
You know, it's a fait accompli.
So how do you see someone like you
in your role evolving in this environment?
Sure.
We did recently, two years ago,a player on the Denver Broncos.
What happened was
he was with the Arizona Cardinals,and he wanted to sign somewhere else.
Now Arizona,Arizona didn't have the money to pay him.
(13:44):
So he wound up signing in Colorado,which got a 4% tax, much better
than where he was from in Connecticut,which I think is about seven.
So I do see this evolving more and more.
What we alluded to, but we didn'tget into, Mark, is you have to have three
conditions present for the signing bonusto be taxable in the right fashion.
It's got to be payableseparately from salary.
(14:05):
It always is. It'sgot to be nonrefundable.
It should be.
And it's not predicatedupon subsequent performance,
which is where football trips up.
[Conrad (14:14):
Correct.] But if you have those three conditions present
and it may not be in the uniform contractin any sport,
but you should be able to addthat paragraph in as an addendum.
Yeah. Great points, great points.
Anything else you'd like to sayabout Soto’s contract or anybody
else's contract?
I think you really - it's fun for us
when we get involved in negotiationsbefore the player signs.
(14:36):
So again,he may have been looking at the Blue Jays
and when you look at the Blue Jays,you got to first consider the US
Canadian treaty.
Regular wages are taxable in Canada,Province of Toronto,
Ontario, at 53.53%, which is ludicrous.
It's it's that's really the federal state,but it's still very high.
It beats all U.S.
(14:57):
rates except for California.
And then pursuant to the US Canadiantreaty,
signingbonuses are only taxed at 15% in Canada.
So then you would get the full creditof the US for the 15%
and not get screwedby playing up in Canada.
But nevertheless,that Ontario tax is very high.
[Raiola (15:15):
Yes, it is.] The provincial tax and also in Quebec, I should say, as well,
where there's many Canadians saythat funds their medical system
to a great extent,the more state run medical system.
But it is very high for US players.
And also they are paid in US dollars,
at least in the [Raiola (15:34):
Right.] National Hockey League.
So that part is settled so we don't haveto worry about the exchange rate.
But I suspect that, yeah,many of the agents
[...] working with people likeyou are calculating this for the future
where seeing this continuedspiral of free agents’ salaries,
and in the National HockeyLeague will probably go up, too,
(15:54):
because the salary cap is going to go upfairly substantially.
Right.
And I don't have the exact numberson Shesterkin, but I know
a great portion of his contractevery year was deemed to be signing bonus.
So that's clearly,to me, doing two things.
One, if there ever was a lockout,you still got to get paid.
But second of all, you know, equallyas important is that you were able to move
(16:17):
those wages outside of New York Statein New York City, which is a big savings.
And I would bet you he’sa resident of a non taxing state.
Okay. Sounds great.
And on that note, on behalf of FordhamUniversity, the Gabelli School of Business
and the Sports Business Initiative,we want to thank you,
Robert Raiola, for again coming on
(16:38):
to share your expertise on this podcast,and you're welcome to come back
any time in the future to discussany other issues that may come up.
Thanks for having me, professor.
And thanks to my producer, Victoria Ilano,for her continued great work.
And thanks to all of you for listening in.
For the Sports Business Podcastat Fordham's
Gabelli School of Business,I’m Mark Conrad or Prof.
(17:02):
C, have a great day.
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