Pittsburgh’s Tax on Only Nonresident Athletes Violates Pennsylvania’s Uniformity Clause

The BR State + Local Tax Spotlight

By Craig B. Fields

While not many states have a uniformity clause in their constitutions, for those that do it can be a powerful tool in a person’s arsenal in challenging a tax. This was recently demonstrated in National Hockey League Players’ Association v. City of Pittsburgh, No.: GD-19-015542 (Pa. Ct. Com. Pl., Sept. 21, 2022), where Pittsburgh’s Non-Resident Sports Facility Usage Fee (“Facility Fee”) was struck down as violating Pennsylvania’s Uniformity Clause.

The 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.

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.

The Decision: The Court first agreed that even though denominated as a “fee,” the imposition was, in substance, a tax. It reasoned that the funds received by Pittsburgh went into its general fund, the “fee” is assessed as a percentage of taxable income, and a legislative purpose of enacting the Facility Fee was the stated goal of reducing a different tax (two-thirds of the Facility Fee was to be used to reduce the amount of tax on admissions to certain places of amusement).

The Court then had little difficulty in finding that the Facility Fee violated the Uniformity Clause, which requires 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 indicated that the Pennsylvania courts have consistently held that residence cannot be made the basis of discrimination in the taxation of persons engaged in the same profession. Here, the Facility Fee was found to be 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 attempted to justify the different tax rates by asserting that resident athletes also pay a two-percent income tax towards Pittsburgh school districts. The Court rejected this argument since the two-percent school tax is levied by the school board, not Pittsburgh, and is used to directly fund the schools. It concluded that “[t]here is no permissible or rational basis for an unequal application of tax rates across residents and nonresidents, and unequal application of tax rates across the same profession” and that the Facility Fee therefore violates the Uniformity Clause of the Pennsylvania Constitution.

This article is one in a series of articles written for the October 2022 edition of The BR State + Local Tax Spotlight.

© 2022 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.