Pennsylvania Commonwealth Court Affirms That Pittsburgh’s Tax on Only Nonresident Athletes Violates State’s Uniformity Clause

The BR State + Local Tax Spotlight

By Craig B. Fields

Although only some states have a uniformity clause in their constitutions, for those that do, it can be a powerful tool in challenging a tax. This was recently demonstrated in National Hockey League Players’ Ass’n v. City of Pittsburgh, No. 1150 C.D. 2022 (Commonwealth Ct., Jan. 10, 2024), where the Commonwealth Court affirmed a trial court and held that Pittsburgh’s Non-Resident Sports Facility Usage Fee (“Facility Fee”) violates Pennsylvania’s Uniformity Clause.

Facts: Pittsburgh enacted the Facility Fee whereby nonresidents of Pittsburgh who use the City’s sports venues to engage in an athletic event or performance for remuneration are subject to a three percent assessment on personal income earned while in Pittsburgh. Similarly situated resident athletes of Pittsburgh are not subject to the Facility Fee. Instead, resident athletes are subject to a one percent earned income tax.

The National Hockey League Players’ Association, Major League Baseball Players’ Association, National Football League Players’ Association, and a nonresident athlete from each association challenged the Facility Fee arguing that it was, in reality, a tax and that it violated the Uniformity Clause of the Pennsylvania Constitution.

Decision: Although Pittsburgh had argued below that the Facility Fee was a fee and not a tax, it now conceded that it was indeed a tax. The Court found that as a tax, the Facility Fee violated the Uniformity Clause, which requires that taxes be uniform upon the same class of subjects, although there is an exception where there is a non-arbitrary, reasonable, and just basis for the disparate treatment.

The Court held that the Facility Fee was facially discriminatory since it levies a three percent income tax on nonresidents in comparison to the City’s one percent income tax on residents. The City’s attempt to justify the different tax rates by asserting that resident athletes also pay a two percent income tax to the Pittsburgh school district was rejected since that two percent tax is levied by the school district, not Pittsburgh, and is used to directly fund the schools. Moreover, the school district is statutorily prohibited from imposing the tax on nonresidents. According to the Court, “[r]ough uniformity is not achieved where only one class of taxpayers—nonresidents—is assessed a 2% tax on income derived from its use of the Facilities.”

The City’s attempt to have portions of the Facility Fee severed by having the Court remove the word “nonresident” from the statute was also rejected. First, the legislation authorizing the Facility Fee only provided for its assessment on nonresidents. Moreover, the legislation explicitly provided that if the Facility Fee was invalidated by a court, then the exemption for nonresidents from the one percent earned income tax no longer applied. This, the Court found, clearly demonstrated that the General Assembly preferred that the Facility Fee be stricken entirely if held unconstitutional.

One judge dissented, asserting that the Facility Fee did not violate the Uniformity Clause since both resident and nonresident athletes ultimately paid a three percent tax on their income.

This update is one in a series of updates written for the February 2024 edition of The BR State + Local Tax Spotlight.

© 2024 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.