Series Talk: Tax implications

[Menzinger]

​

Quick Comparison Example (Hypothetical)​

Scenario	Regular Salary	Upfront Bonus
Gross Income	$10M over 1 year	$10M on Day 1
Tax Rate	50%	15% (via treaty)
Net After Tax	$5M (earned over time)	$8.5M on Day 1
1-Year Return @ 5%	$0 (can’t invest until earned)	$425,000
Total After 1 Year	$5M	$8.925M

The issue is there's no much direct evidence that signing bonus heavy contracts actually lower aavs..while there's plenty of examples of guys signing in low tax locals giving more team friendly deals (and even more so when the team in question is good).

 

[WillNy29]

The issue is there's no much direct evidence that signing bonus heavy contracts actually lower aavs..while there's plenty of examples of guys signing in low tax locals giving more team friendly deals (and even more so when the team in question is good).

that's not a tax problem thats a teams not smart enough to sell to dumb jocks the value of money upfront problem

 

[WillNy29]

The tax rate on a signing bonus is not 15%. The bonus is taxed where the player is a resident. The 15% is the amount that the tax treaty allows the other country to withhold. So for Matthews- CRA gets 15% and the IRS gets to tax it at Arizona rates, then he gets a tax credit for the amount paid to Canada.

For Marner’s last contract, he would have paid tax at his marginal Canadian tax rate for all of the bonus.

why do you believe Marner is a resident of Canada? he could easily be renting and have made a clean break? The Arizona tax rate I believe is 0% so its only the fed tax hes paying on and is credited the difference anyways.

 

[WillNy29]

That sounds like the master plan anyways. You can't force everyone into one way of life because some people / govs / corps / companies are poorly run and can't make it work. So what do you do? Make everyone do the same thing? Life becomes uninteresting and people will become depressed and find no meaning then who knows what.

Equalisation of Sports taxes at the NHL level is a worthy idea. They provide entertainment and positive national morale. We need to keep Canada competitive and taxing people into oblivion isn't the way.

Like sorry, that little art shop \ museum thing getting money and sees 20 customer a month is not a good use of money and there are tens of thousands of wasteful programs like this.

Canada is poorly run, as are the Leafs.

I guess we should stop funding healthcare and medical research

 

[WillNy29]

You should tell the owners that just complained about this.

Or the players/GMs mentioning it.

Let them know it is not a big issue because they seem to care.

No offense to you, but I am going to assume they have a better grasp on free agency and taxes than you.

the owners complain because they dont want to pay it all up front. I know someone who did the taxes for Canadians that played for the San Jose sharks. the CRA usually tries to deem them residents anyways based on their primary and secondary factors so the tax accountants just get creative. Hell New York has a 3 level tax all the way down to the city and players still sign there, they just have their houses set up in Connecticut and have all of their endorsement dollars there.

Pre tell how would one actually equalize for taxes the cap? How would they ensure everyones tax situation is equally handled by the accountants? How would we account for treaty factors for German, Swedish, Finnish etc players? how would they adjust for IRS/CRA residency proclamations for Canadians playing in the US who forgot to sell their house or had the CRA deem them residents because they have a car registered to them that is located in Canada?

 

[notbias]

the owners complain because they dont want to pay it all up front. I know someone who did the taxes for Canadians that played for the San Jose sharks. the CRA usually tries to deem them residents anyways based on their primary and secondary factors so the tax accountants just get creative. Hell New York has a 3 level tax all the way down to the city and players still sign there, they just have their houses set up in Connecticut and have all of their endorsement dollars there.

Pre tell how would one actually equalize for taxes the cap? How would they ensure everyones tax situation is equally handled by the accountants? How would we account for treaty factors for German, Swedish, Finnish etc players? how would they adjust for IRS/CRA residency proclamations for Canadians playing in the US who forgot to sell their house or had the CRA deem them residents because they have a car registered to them that is located in Canada?

The tax differences are an issue, or they are at least to players, agents, GMs, and owners.

It can also be an issue and still not have a solution, I don't think there is a fair way to do it.

I think there are too many other factors such as weather, media, closeness to families, and more that all contribute.

There will never be a perfect cap system, so I don't mind them keeping it, but it doesn't change the fact that there are advantages to having lower taxes.

 

[WillNy29]

The tax differences are an issue, or they are at least to players, agents, GMs, and owners.

It can also be an issue and still not have a solution, I don't think there is a fair way to do it.

I think there are too many other factors such as weather, media, closeness to families, and more that all contribute.

There will never be a perfect cap system, so I don't mind them keeping it, but it doesn't change the fact that there are advantages to having lower taxes.

all I'm trying to say is the tax difference for people that make what the players do is minuscule especially for the big dollar guys. I can agree on the bottom end guys because theres only so much tax accountants can do at that point. The PA and the Owners could easily hash something out in the CBA if there was An actual push from the owners to do so. Jeremy Jacobs teams contend with some of the worst taxes and hes got the most influences on the Board if he wanted something done it would be done so in my opinion from the owners side its just lip service.

at the same time the highest taxed locals in the NBA draw the most money and have the stars wanting to play for them so Ill agree with you that there is a lot of things that go into decisions on where to play I just dont think the taxes are the BIGGEST factor. especially when someone is making millions

 

[Space umpire]

why do you believe Marner is a resident of Canada? he could easily be renting and have made a clean break? The Arizona tax rate I believe is 0% so its only the fed tax hes paying on and is credited the difference anyways.

Arizona is 2.5% but that’s pretty low.

 

[AnCatDubh]

why do you believe Marner is a resident of Canada? he could easily be renting and have made a clean break? The Arizona tax rate I believe is 0% so it’s only the fed tax hes paying on and is credited the difference anyways.

It would be almost impossible for Marner to get out of Canadian residency during his time as a Leaf. Residency is a matter of fact - it’s not as simple as everyone on this board makes it seem.

There is a small Arizona tax rate. But the federal rate is still 37% - which is not anywhere close to the 15% you used in your chart.

 

[Stephen]

​

Quick Comparison Example (Hypothetical)​

Scenario	Regular Salary	Upfront Bonus
Gross Income	$10M over 1 year	$10M on Day 1
Tax Rate	50%	15% (via treaty)
Net After Tax	$5M (earned over time)	$8.5M on Day 1
1-Year Return @ 5%	$0 (can’t invest until earned)	$425,000
Total After 1 Year	$5M	$8.925M

This is a nice breakdown. Those July 1 cash payouts have to be a big advantage for the Leafs and a big boost to players. You’re getting your money 9 months ahead of schedule. The interest alone is going to make a difference let alone investments etc.

 

[Bradely]

I extrapolated the data to all teams in the playoffs

Team Tax-Adjusted Cap Hit Tax-Adjusted Overage
Florida Panthers $132,908,127 $44,908,127
Tampa Bay Lightning $119,000,000 $31,000,000
Dallas Stars $119,000,000 $31,000,000
Nashville Predators $119,000,000 $31,000,000
Vegas Golden Knights $119,000,000 $31,000,000
Colorado Avalanche $110,700,000 $22,700,000
Boston Bruins $108,800,000 $20,800,000
Carolina Hurricanes $108,800,000 $20,800,000
New Jersey Devils $105,100,000 $17,100,000
Edmonton Oilers $105,902,975 $17,902,975
Washington Capitals $103,200,000 $15,200,000
New York Rangers $101,300,000 $13,300,000
New York Islanders $101,300,000 $13,300,000
Vancouver Canucks $95,700,000 $7,700,000
Winnipeg Jets $93,800,000 $5,800,000
Toronto Maple Leafs $88,000,000 $0

Sucks to be at the very bottom of this list.

Where is Montreal, Vancouver and Calgary?

 

[mydnyte]

Where is Montreal, Vancouver and Calgary?

this is the Leafs forum right?
but,
Montreal 49.30
Ottawa, Toronto 47.75
Vancouver 46.92
Winnipeg 45.91
Calgary, Edmonton 42.76

Montreal is the highest in Canada, BUT, they have some tax advantages that no other province in the country has a lower cost of living and The Quebec Abatement which is a reduction of 16.5 percentage points of federal personal income tax for all tax filers in Quebec

0.14% more in Quebec on income tax based on a 10mil salary.
take home after tax (abatement factored in)
$10,000,000 Ontario $4,685,195.51 53.15%
$10,000,000 Quebec $4,699,347.41 53.01%
But, the cost of living is much lower
Cost of Living:
Toronto is 20–24% more expensive than Montreal

 

[Bradely]

this is the Leafs forum right?
but,
Montreal 49.30
Ottawa, Toronto 47.75
Vancouver 46.92
Winnipeg 45.91
Calgary, Edmonton 42.76

Montreal is the highest in Canada, BUT, they have some tax advantages that no other province in the country has a lower cost of living and The Quebec Abatement which is a reduction of 16.5 percentage points of federal personal income tax for all tax filers in Quebec

0.14% more in Quebec on income tax based on a 10mil salary.
take home after tax (abatement factored in)
$10,000,000 Ontario $4,685,195.51 53.15%
$10,000,000 Quebec $4,699,347.41 53.01%
But, the cost of living is much lower
Cost of Living:
Toronto is 20–24% more expensive than Montreal

Thank you

 

[Craig Button]

And we still chose to give 50% of the cap to 4 or 5 guys.

Then, they were given massive lump sum signing bonuses to offset the tax issue, only to get no benefit with term or AAV.

Double trouble, well done, Shanny and co.

What do you mean by “they”?

having a bonus does not offset anything.

The bonus for JT and that he should only be taxed 15% is for the first bonus when he signed the contract.
But since he’s getting more than one bonus for that contract CRA has decided that it wasn’t really a bonus and it should be taxed accordingly.

 

[JT AM da real deal]

all I'm trying to say is the tax difference for people that make what the players do is minuscule especially for the big dollar guys. I can agree on the bottom end guys because theres only so much tax accountants can do at that point. The PA and the Owners could easily hash something out in the CBA if there was An actual push from the owners to do so. Jeremy Jacobs teams contend with some of the worst taxes and hes got the most influences on the Board if he wanted something done it would be done so in my opinion from the owners side its just lip service.

at the same time the highest taxed locals in the NBA draw the most money and have the stars wanting to play for them so Ill agree with you that there is a lot of things that go into decisions on where to play I just dont think the taxes are the BIGGEST factor. especially when someone is making millions

Always remember da JT case .. he hired da best KPMG international tax guy .. he developed a tax plan and strategy involving multiple corporations and tax loss entities and da CRA still decided to go after him .. but you are right at bottom end guys really can't afford da advice/plan setup/execution costs .. we are massively overtaxed here in Canada and da real solution is much lower taxes and smaller government

 

[Maple Leaf]

Always remember da JT case .. he hired da best KPMG international tax guy .. he developed a tax plan and strategy involving multiple corporations and tax loss entities and da CRA still decided to go after him .. but you are right at bottom end guys really can't afford da advice/plan setup/execution costs .. we are massively overtaxed here in Canada and da real solution is much lower taxes and smaller government

Agree these taxes are ridiculous

 

[Menzinger]

that's not a tax problem thats a teams not smart enough to sell to dumb jocks the value of money upfront problem

Until the players start to show a willingness to change behavior, it remains an advantage for some teams over others.

If/when Marner signs for 2-2+ mil more in a tax heavier market than Rantanen just did it'll probably be the biggest example we see so far of that playing out

 

[usernamezrhardtodo]

that's not a tax problem thats a teams not smart enough to sell to dumb jocks the value of money upfront problem

Alan Walsh said that agents over play the tax situation in canada so they can squeeze more from those teams and it's well known that it's BS. It's just agents pushing the narrative.

 

[Nineteen67]

Alan Walsh said that agents over play the tax situation in canada so they can squeeze more from those teams and it's well known that it's BS. It's just agents pushing the narrative.

The difference in salaries between Ontario and Florida that I’m hearing suggest Ontario has a 25+ % provincial income tax. That can’t be true, and if it is, that’s not the NHL’s problem.

 

[Maple Leaf]

Alan Walsh said that agents over play the tax situation in canada so they can squeeze more from those teams and it's well known that it's BS. It's just agents pushing the narrative.

So there is tax advantage?

 

[ULF_55]

The difference in salaries between Ontario and Florida that I’m hearing suggest Ontario has a 25+ % provincial income tax. That can’t be true, and if it is, that’s not the NHL’s problem.

Taxation isn't an issue, the hard cap is.

 

[Menzinger]

Taxation isn't an issue, the hard cap is.

Or at least is the biggest obstacle to actually offsetting the issue

 

[usernamezrhardtodo]

So there is tax advantage?

There is a slight advantage but @WillNy29 has said...there is a super RRSP for these guys that they can tap into once they retire. If I remember correctly, they can move to a state like Texas and live there for 2yrs and then pull the money out of the "RRSP" as if they played there the whole time.

The other factor is that they also get taxed in every jurisdiction for every game...so they would pay tax in the different states for 41 games.

I would take a player agent's word that there isn't nearly as a big tax difference as the agents would have you believe over some guy on TSN telling you that.

 

[ACC1224]

Alan Walsh said that agents over play the tax situation in canada so they can squeeze more from those teams and it's well known that it's BS. It's just agents pushing the narrative.

If it’s well known why aren’t the Canadian GMs aware?

 

[ULF_55]

There is a slight advantage but @WillNy29 has said...there is a super RRSP for these guys that they can tap into once they retire. If I remember correctly, they can move to a state like Texas and live there for 2yrs and then pull the money out of the "RRSP" as if they played there the whole time.

The other factor is that they also get taxed in every jurisdiction for every game...so they would pay tax in the different states for 41 games.

I would take a player agent's word that there isn't nearly as a big tax difference as the agents would have you believe over some guy on TSN telling you that.

One correction, some of the 41 away games are in no tax states.

And ask Tavares how his tax battle is going?