Arizona Administrative Code › Title 15 - REVENUE › Chapter 2 - DEPARTMENT OF REVENUE - INCOME AND WITHHOLDING TAX SECTION › Subchapter C - INDIVIDUALS › Article 6 - NONRESIDENTS › Section R15-2C-604 - Nonresident Members of Professional Athletic Teams

Current through Register Vol. 30, No. 28, July 12, 2024
A. The Arizona source income of a nonresident
				  individual who is a member of a professional athletic team includes that
				  portion of the individual's total compensation for services rendered as a
				  member of the professional athletic team during a taxable year which the number
				  of duty days spent within Arizona 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 Arizona during the taxable year. Duty days shall be included
				  in the taxable year in which they occur.
B. Travel days that do not involve a game,
				  practice, team meeting, promotional caravan or other similar team event in
				  Arizona are not considered duty days spent in Arizona. However, these travel
				  days shall be considered in the total duty days spent both within and without
				  Arizona.
C. For purposes of this
				  Section:
1. The term "professional athletic
				  team" includes, but is not limited to, any professional baseball, basketball,
				  football, soccer, or hockey team.
2. The term "member of a professional
				  athletic team" includes employees who are active players, players on the
				  disabled list, and any other persons required to travel and who travel with and
				  perform services for a professional athletic team on a regular basis. This
				  includes, but is not limited to, coaches, managers, trainers, and
				  broadcasters.
3. The term "duty
				  days" includes:
a. All days during a taxable
				  year from the beginning of a professional athletic team's 1st regular game of
				  the season through the last game in which the team competes or is scheduled to
				  compete except:
i. If a person joins a team
				  during the period described in subsection (C)(3)(a), the person's duty days
				  shall begin on the day the person joins the team. Conversely, if a person
				  leaves a team during the period described in subsection (C)(3)(a), the person's
				  duty days shall end on the day the person leaves the team. If a person switches
				  teams during the taxable year, a separate duty day calculation shall be made
				  for the period the person is with each team.
ii. 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 the member is suspended without pay and
				  prohibited from performing any services for the team, shall not be treated as
				  duty days.
b. Days that
				  do not fall within the period described in subsection (C)(3)(a) on which a
				  member of a professional athletic team renders a service for a team, except
				  practice days and exhibition games before the 1st regular game of the season
				  (for example, participation in instructional leagues, the "Pro Bowl," or
				  promotional events). Rendering a service includes conducting training after the
				  1st regular game of the season and rehabilitation activities, but only if
				  conducted at the team facilities.
c. Game days (except exhibition games,
				  practice days, and days spent at team meetings after the 1st regular game of
				  the season), promotional events, and days served with the team through all
				  post-season games in which the team competes or is scheduled to
				  compete.
d. Days on the disability
				  list. However, days for which a member of a professional athletic team is on
				  the disabled list and does not conduct rehabilitation activities at team
				  facilities in Arizona and is not otherwise rendering services for the team in
				  Arizona, shall not be considered duty days spent in Arizona.
e. The provisions of this subsection can be
				  illustrated by the following examples:
Example 1: Player A, a member of a professional athletic
					 team, is a nonresident of Arizona. Player A's contract for the team requires A
					 to report to the team's training camp and to participate in all exhibition,
					 regular season, and playoff games. Player A has a contract that covers seasons
					 that occur during year1/year2 and year2/year3. Player A's contract provides
					 that A receives $500,000 for the year1/year2 season and $600,000 for the
					 year2/year3 season. Assuming player A receives $550,000 from the contract
					 during taxable year 2 ($250,000 for one-half the year1/year2 season and
					 $300,000 for one-half the year2/year3 season), the portion of the compensation
					 received by player A for taxable year 2, attributable to Arizona, 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 Arizona during taxable
					 year 2 (attributable to both the year1/year2 season and the year2/year3 season)
					 and the denominator of which is the total number of player A's duty days spent
					 both within and without Arizona for the entire taxable year.
Example 2: Player B, a member of a professional athletic
					 team, is a nonresident of Arizona. 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, which is not a team facility, but is located in Arizona, B's team
					 travels to Arizona for a game. The number of days B's team spends in Arizona
					 for practice, games, meetings, and other activities, while B is present at the
					 clinic, are not considered duty days spent in Arizona for B for that taxable
					 year for purposes of this Section, but the days are included within total duty
					 days spent both within and without Arizona.
Example 3: Player C, a member of a professional athletic
					 team, is a nonresident of Arizona. During the season, C is injured and is
					 unable to render services for C's team. C performs rehabilitation exercises at
					 the team facilities in Arizona as well as at personal facilities in Arizona.
					 The days C performs rehabilitation exercises in the team facilities are duty
					 days spent in Arizona for C for that taxable year for purposes of this Section.
					 However, days C spends at personal facilities in Arizona are not duty days
					 spent in Arizona for C for the taxable year for purposes of this Section, but
					 these days are included within total duty days spent both within and without
					 Arizona.
Example 4: Player D, a member of a professional athletic
					 team, is a nonresident of Arizona. During the season, D travels to Arizona to
					 participate in the annual all-star game as a representative of D's team. The
					 number of days D spends in Arizona for practice, the game, meetings, etc., are
					 duty days spent in Arizona for D for the taxable year for purposes of this
					 Section, as well as being included within total duty days spent both within and
					 without Arizona.
Example 5: Assume the same facts as given in example 4,
					 except that player D is not participating in the all-star game and is not
					 rendering services for D's team in any manner. Instead D is travelling to and
					 attending the game solely as a spectator. The number of days D spends in
					 Arizona for the game are not duty days spent in Arizona for purposes of this
					 Section. However, these days are included within total duty days spent both
					 within and without Arizona.
4. 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 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 the taxable year.
				  Total compensation includes compensation received for services that are
				  rendered during the taxable year on a date that does not fall within this
				  period (for example, participation in instructional leagues, the "Pro Bowl," or
				  promotional events).
5. For
				  purposes of subsection (C)(4) total compensation includes, but is not limited
				  to, salaries, wages, bonuses as described in subsection (C)(6), and any other
				  type of compensation paid during the taxable year to a member of a professional
				  athletic team for services performed during the year. Total compensation does
				  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 for the team.
6. For purposes of this Section, "bonuses"
				  included in "total compensation for services rendered as a member of a
				  professional athletic team" subject to the allocation described in subsection
				  (A) are:
a. Bonuses earned as a result of play
				  (for example, performance bonuses) during the season, including bonuses paid
				  for championship, playoff or "bowl" games played by the team, or for selection
				  to all-star league or other honorary positions; and
b. 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.