Super Bowl LVI: new location, some new teams, and new tax issues to consider

Wolters Kluwer Tax & Accounting looks at the tax issues athletes and fans should consider as they participate in Super Bowl LVI activities on and off the field.

What: This year, Super Bowl LVI will take place on February 13 in Inglewood, California. The Super Bowl is considered the biggest single sporting event of the year in the US. Professional teams compete all season for the chance to play and cities compete for the chance to host. With all the money associated with the game, it is not surprising that the tax authorities also get involved.

Why: Professional athletes and sporting events are an attractive target for states that seek revenue since the athletes are highly paid and it is relatively easy to track the amount of their activity in a state. The Super Bowl also draws a lot of fans who spend money on taxable items like hotel rooms, food and souvenirs. The taxes can really start to add up.

• The typical player in the Super Bowl can owe state income taxes not only to the state where the Super Bowl is played. This year, this means they will owe state income taxes in California, which is a relatively high tax state, and also to the state of residence of the teams playing (this year’s remaining possibilities, prior to the AFC and NFC championship games, are from California, Missouri, and Ohio). In addition, state income taxes will be owed in the player’s state of domicile and to many other states in which the player has played a game that year, if the state has an income tax as all except nine do
• After two years of playing the Super Bowl in Florida, a state without an income tax, Super Bowl LVI is being played in California, which requires withholding from athletes based on “duty days” in the state. California also has a withholding requirement for performance bonuses, which would apply to any players who have contracts with bonuses for making it to or winning the Super Bowl. California also requires withholding on any endorsement income of the players or coaches associated with the state. California has the highest top marginal individual income tax rate in the country at 13.3 percent for those earning over $1 million
• The states often use a “duty days” calculation or a “games played” calculation to allocate income to the state, but the calculation in each state is a little different
• If an athlete has changed teams during the year, it gets a little more complicated
• Some cities where professional athletes play also have a city income tax, although Inglewood, where Super Bowl LVI is being played, does not
• Professional athletes also have to pay a federal income tax with a top rate of 37 percent
• Many states have introduced sports betting over the last few years, following a Supreme Court victory in a case brought by New Jersey. Those sports betting statutes typically include a fee for the sports betting permit and a tax on each bet placed in the state
• Legal sports betting operations will be likely to report certain gambling winnings to the IRS on Form W-2G and may be required to do federal and state income tax withholding from larger jackpots

Who: State and federal tax experts at Wolters Kluwer Tax & Accounting are available to discuss the potential tax issues surrounding Super Bowl LVI.

PLEASE NOTE: These materials are designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering tax advice or accounting, legal, tax or other professional service.

Contact: To arrange an interview with federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topic, please contact Bart Lipinski.