Super Bowl Could Create Super Tax Revenue for New York and New Jersey

January 30, 2014

On February 2, Super Bowl XLVIII will take place at New Jersey’s MetLife Stadium with related activities held throughout the greater New York metro area. The 2014 Super Bowl Host Committee has been preparing for the big game since NFL Commissioner Roger Goodell announced the site in May 2010.

While there is a focus on the Super Bowl’s intense security, weather contingency plans and Peyton Manning’s “legacy,” there has been only a limited amount of discussion regarding the potential economic impact the game will have on the surrounding metropolitan area.

The infusion of game-related revenue is expected to boost many sectors of the New York/New Jersey economy, ranging from the hospitality industry to entertainment venues to the transportation industry. For New Orleans last year, according to the 2013 Super Bowl Host Committee, the game propelled $480 million in regional spending in the metropolitan region and the creation of approximately 5,600 full and part-time jobs, resulting in nearly $154 million in additional earnings for the local residents. This spending and jobs creation translated into almost $21 million of state revenue comprised of sales, hotel, gambling, and income tax.

For 2014, the New York/New Jersey Super Bowl XLVIII host committee estimates the game will bring 400,000 visitors and $550 to $600 million in revenue to the New York-New Jersey area. There will be costs incurred however; for example New Jersey Transit has allocated $5.3 million for Super Bowl-related expenses, and there will be spending by federal, state and local governments related to contracted civilian personnel to render services; the funding of security teams from the FBI, Port Authority police, NJ Transit police, Department of Homeland Security and NYPD; and other costs. The expenses, however, are expected to be very low compared to total revenue raised and total 2014 budgets of the applicable government agencies. This week's trend in falling ticket prices (at $1,200 now, the least expensive Super Bowl ticket in more than 10 years) and reductions in hotel rates (according to Priceline now 55% above normal, compared to 90% above normal in December), there have been observations that total regional revenue expectations may not be attained; however as most game attendees and visitors planned the trip in advance, this week's pricing decreases may not have a significant impact on total regional revenue.

There are economic considerations to be encountered by the Super Bowl players as well. With regards to the Super Bowl athletes, NFL superstars like Peyton Manning may actually take home only 14% of their total Super Bowl game paycheck. Playing in New Jersey for the Super Bowl will also cost Peyton Manning an additional $34,500 in state income tax resulting from a New Jersey income tax rate higher than Colorado or even Indiana, where Manning maintains a residence.

The catch is that the state of New Jersey will not only receive tax from Manning’s share of his Super Bowl earnings, but also Manning’s share of his entire 2014 NFL salary. Why?

Following is an illustration of Peyton Manning’s estimated 2014 tax cost to play in the Super Bowl.  Consider Manning’s base annual Denver Broncos salary of $20 million (confirmed by The Denver Post), plus either $92,000 (if Denver wins) or $46,000 (if Denver loses) in Super Bowl earnings. For this illustration we assume the following individual tax rates:

  • Federal – 39.6%
  • Additional Medicare Cost  – 0.9%
  • FICA – 6.2% (on the first $117,000 of earnings)
  • Medicare – 1.45%
  • Colorado – 4.63% (Manning is a resident, and Colorado taxes all his income)
  • New Jersey – 8.97% (New Jersey taxes income earned in the State by non-residents)

Without playing in the Super Bowl, Manning’s estimated 2014 tax liability is cited below, considering only his Denver Bronco salary and deducting only state income taxes paid:

Federal – $7,734,000
Additional Medicare Cost – $177,800
FICA – $7,254
Medicare – $290,000
Colorado – $925,000

Total Tax – $9,134,054 (this total represents 46% of Manning’s $20 million salary and ignores state tax credits, tax paid to other states and localities for games and practice days outside of Denver, and other factors)
By playing in the Super Bowl, Manning’s 2014 tax liability will be as follows:

Wins Super Bowl Loses Super Bowl
Federal-$7,758,000 Federal - $7,740,000
Additional Medicare Tax - $178,600 Additional Medicare Tax - $178,200
FICA - $7,254 FICA - $7,254
Medicare - $291,334                     Medicare - $290,667
Colorado - $897,000 Colorado - $895,000
New Jersey - $62,500 New Jersey - $62,300
Total Tax - $9,194,688 Total Tax - $9,173,421
Additional Tax Paid - $60,634 Additional Tax Paid - $39,367
Net after-tax cash flow on
Super Bowl winning - $31,366
Net After-tax cash flow for playing in
the Super Bowl- $6,633


Manning’s percentage of net after tax cash flow received from the game is 34% if Denver wins  ($31,366/$92,000) and only 14% if Denver loses ($6,633/$46,000).

New Jersey is able to tax Manning’s Super Bowl earnings based on the state’s ability to tax non-residents that render services and earn income in New Jersey; professional athletes generally are included in this tax regime. All states with an income tax have a similar ability to tax non-residents.
As a result, each New Jersey non-resident playing in the Super Bowl will be required to  apportion his share of 2014 NFL team salary income subject to the state of New Jersey tax based on a “duty day” formula, which derives the amount of tax that is payable to the state.  A duty day is defined as any day NFL team services (generally defined under the contract with the team) are performed, from the beginning of training camp activity until the last game played (i.e., the NFL season). The season’s duty days in New Jersey are then divided by the season’s total duty days, to create a ratio. This ratio is then multiplied by the player’s total NFL team salary compensation; the result is deemed to be the New Jersey-sourced NFL team salary income.(that’s very cumbersome nomenclature)

On average, each NFL player has approximately 200 total duty days without regard to the playoffs.  In our illustration above for Manning, we are assuming he will have a total of 7 duty days (the entire week of Super Bowl, without regard to the 2014 season).  Of the total $20 million 2014 Denver Bronco salary, 3.5% (7/200) or $700,000 plus the proportionate 3.5% share of the Super Bowl salary will be subject to the 8.97% New Jersey tax. Further, when the Broncos play an additional game in New Jersey in 2014, the duty days in New Jersey will increase, along with the New Jersey income tax liability for the player. As a presumed Colorado resident, Manning can take a credit against Colorado income tax for taxes paid to New Jersey and other non-resident states, not above the Colorado effective rate. 

Alternatively, if Manning were to be traded after the Super Bowl to the Philadelphia Eagles in exchange for the reigning Pro Bowl MVP Nick Foles, and maintained residency in the state of Pennsylvania, Manning’s tax liability to New Jersey would be significantly reduced because of Pennsylvania’s favorable Reciprocal Tax Agreement with the New Jersey.  Under this agreement, Pennsylvania residents who receive compensation from New Jersey sources are not subject to New Jersey income tax on those earnings. (Certain states including New Jersey exempt residents of one state that work in a neighboring state from taxation; as a result residents pay income tax only to their state of residency.)  Under this example, Manning would be responsible for paying only 3.07% Pennsylvania income tax rate on the compensation earned after the Super Bowl, rather than the 8.97% tax rate assessed by New Jersey.

It is necessary and prudent for a professional athlete with duty days in multiple state jurisdictions (and foreign countries) to undertake proper planning prior to entering into contracts and establishing state residency to take advantage of available state income tax credits and avoid statutory residency exposure in a state where a residence is not maintained.

The illustrations and comments cited in this article will change based on facts and circumstances and should not be relied upon as tax, legal, or accounting advice.    

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