Location, tax rates can have big impact on contract’s value

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With the mind-boggling money being doled out in NBA contracts, players don’t seem to be overly concerned about state taxes – or the lack of them.

Stephen Curry signed a $201 million deal with Golden State and Blake Griffin got a $175 million from the Los Angeles Clippers. The rub: In California, the top tax rate of 13.3 percent is the highest in the nation. To get just a rough indication of how much state tax they might face, consider that 13.3 percent of $201 million is about $26.7 million.

Meanwhile, Houston Rockets guard James Harden signed a $228 million extension to play in Texas, which has no state income tax.

Players are keenly aware of the differences, but it’s just one of many factors in their decisions.

How big a factor, it depends on the player and situation.

“It’s a consideration” for players, said Sean Packard, the tax director for Octagon Financial Services. “It’s not always the be-all and end-all, but it’s definitely something agents look at and that players look at.”

But when it comes to the IRS, the dollars connected to a player’s contract don’t tell the whole story about how much he’s going to be making. Where a player chooses to play – for instance the Boston Celtics or the Miami Heat – could go a long way in determining how much money he ends up receiving.

Players realize they could make more accepting a deal for less money from a team located where there are no state taxes than by signing with a team offering more money but located where there are state taxes.

“You’ve got to remember the best gross contract might not be the best net contract,” said Robert Raiola, who includes many professional athletes among his clients in his role as director of sports and entertainment for the PKF O’Connor Davies accounting firm.

Raiola cites former Utah Jazz forward Gordon Hayward‘s recent deal with the Celtics as an example. Boston and the Miami Heat could have offered Hayward essentially the same contract, but Hayward would have made more in Miami due to the different tax rates in Florida and Massachusetts. Of course, that would depend on where he had taken up residence.

Hayward agreed to a four-year deal with a total value of around $128 million. But according to Raiola’s calculations, Hayward’s “net” deal adds up to about $69.4 million after taxes are taken into consideration. Raiola said the same contract from Miami would have netted Hayward about $71.4 million.

If Hayward had stayed in Utah, he could have received a five-year maximum deal worth over $172 million. Raiola said that would have equated to about $91.3 million after taxes.

These types of comparisons aren’t uncommon.

Packard says he has a client who was choosing among three teams last year. Packard said a team from a state without an income tax offered his client the lowest salary, but it actually turned out to be the most lucrative deal once taxes were taken into account.

Packard says teams located in places without state income taxes use it as a leveraging tool and make players well aware of the advantages of signing there. In the NBA, that would include the Heat, Rockets, Orlando Magic, San Antonio Spurs, Dallas Mavericks and Memphis Grizzlies.

“When they’re pitching a player, they’ll say (that) we may be offering you less money, but they’ll kind of do their own calculations for the taxes and show that this is how you end up netting,” Packard said. “They know what other teams are pitching as well.”

Massachusetts has a 5.1 percent tax rate, whereas Florida doesn’t have a state income tax. But figuring out the difference in what Hayward would have made in Miami rather than Boston isn’t as simple as comparing those figures.

That’s because many states have a so-called “jock tax” that charges athletes visiting from other states to play games. For instance, Texas doesn’t have a state income tax, but members of the Mavericks, Rockets and Spurs are taxed for each day they spend practicing or playing road games in states that do have this tax.

Under that same rule, even if Hayward chooses to live somewhere other than Massachusetts, he’d be taxed by the state for each day he spends in Boston playing in a game, practicing or participating in some other team function.

So the difference in net pay an athlete might receive for choosing a team in a low-tax state over a team in a high-tax state isn’t as great as it might be if he were only being taxed in his home state.

These types of decisions must be made by free agents in all sports – not just basketball.

When defensive tackle Ndamukong Suh left the Detroit Lions for the Miami Dolphins in March 2015, he received $60 million in guaranteed money. Raiola said the difference in tax rates meant the Lions would have needed to offer him $65 million guaranteed just for the two contracts to have the same net value.

But tax rates are just one factor in a player’s decision.

“It’s all up to the player’s preference,” said Josh Horowitz, a co-founder of the sports and entertainment division at the WithumSmith+Brown accounting firm. “Maybe a player wants to live in New York and wants to live that lifestyle, so they’re willing to pay the extra tax, as compared to going to Miami or Texas.

“It depends on what they want to do. If they want to go chase a ring, they’ll go to Golden State right now and pay the higher tax to chase a ring. It all depends on what everyone’s preference is.”

 

Report: NBA not headed toward 1-16 playoff seeding

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NBA commissioner Adam Silver said the league would continue look at 1-16 playoff seeding.

Ken Berger of Bleacher Report:

Silver is well-intentioned on this issue, and open-minded, too—as he is on most agenda items that could, in theory, make the league better. But despite his willingness to discuss postseason reformatting, multiple people familiar with league discussions say it’s not anywhere near the top of the agenda.

After its analysis of the issue in ’15, the league concluded that, for a variety of reasons, it wasn’t sensible to change the playoff format. The two key factors, according to league sources, were 1) travel; and 2) a belief among league officials that conference imbalance was a temporary trend that would correct itself, as it typically has in the past.

For playoff qualification to truly be fair, teams would have to play a balanced schedule. As is, teams play teams in their own conference 52 times and teams from the other conference 30 times.

More 10 p.m. starts on the East Coast and 4 p.m. starts on the West Coast would hurt TV ratings.

Plus, as relative conference strength exists now and has existed for several years, 1-16 playoff seeding would make it harder for bigger Eastern Conference markets and easier for smaller Western Conference markets to qualify for the postseason.

Quality of competition matters, and there would be value in the NBA building a playoff field of its 16 best teams. But follow the money. There isn’t nearly enough urgency with this issue to overcome the direct financial setbacks reform would cause.

Draymond Green’s MRI comes back negative

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The Warriors can exhale. Their status as overwhelming championship favorites remains intact.

Draymond Green injured his knee in Golden State’s season-opening loss to the Rockets, but it appears he didn’t suffer major damage.

Monte Poole of NBC Sports Bay Area:

Even if Green misses a little time, the Warriors should be fine. They can cruise until playoffs – maybe even a round or two into the playoffs.

Kevin Durant and Stephen Curry are Golden State’s best players, but Green’s defense is so important, especially in small-ball lineups with him at center. The Warriors led Houston by 13 when Green left the game and then couldn’t get enough fourth-quarter stops in a one-point loss.

Golden State values rest and built a supporting cast around its stars to follow through. If Green misses tomorrow’s game against the Pelicans or any beyond, Jordan Bell, David West, Kevon Looney and Omri Casspi could all see bigger roles.

Report: Grizzlies starting power forward JaMychal Green out several weeks

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The Grizzlies are undefeated, having topped another playoff hopeful (Pelicans) in their season-opener.

But things seem tenuous in Memphis.

Not only is Chandler Parsons feuding with Grizzlies fans, JaMychal Green is hurt.

Shams Charania of Yahoo Sports:

The supporting cast looks rickety around Mike Conley and Marc Gasol unless second-rounder Dillon Brooks (19 points on 7-of-13 shooting +17 against New Orleans) keeps humming. And maybe even still then.

Green’s injury opens the door for bigger roles for Jarell Martin and maybe Parsons (gulp).

At least Green locked in his guaranteed money. This shows why he couldn’t afford to risk taking the qualifying offer.

Booed by Grizzlies fans, Chandler Parsons says he’ll treat home games like road games

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Chandler Parsons‘ great sin? Signing a four-year, $94 million contract and failing to justify it due to injuries. He missed 48 games last season and struggled mightily while on the court.

His more recent transgression? Missing a couple free throws.

The Grizzlies forward missed a pair from the line in yesterday’s season-opening win over the Pelicans, and Memphis fans booed him:

Later, Parsons drew a three-shot foul, and Marc Gasol tried to rally the crowd behind Parsons:

Plenty of fans cheered, but as Parsons went 1-for-3, others still booed.

Parsons, via Geoff Calkins of The Commercial Appeal:

“I’ll just go into every game with the mentality that it’s a road game, if that’s how it’s going to be,” he said.

Finally, Parsons stuck up for himself, saying, “They can boo me, they can sarcastically cheer me, they can do whatever they want. … It’s tasteless , man, it makes no sense. We’re athletes, we’re human beings. I don’t know them personally, so, it’s just a little strange to me, but that’s sports.”

If Parsons didn’t understand Mavericks fans booing him after he left Dallas, he sure isn’t going to understand Grizzlies fans booing him while he’s still in Memphis.

Fans largely see Parsons as a character in the drama that is the Grizzlies – something removed from their everyday reality. Of course, Parsons is taking it personally. He’s a person, and it’s his everyday reality.

It’s unclear what portion of Memphis fans booed him. Grizzlies fans probably aren’t excited about cheering him right now, but many did – as a direct response to the boos. Even if they would’ve preferred no reaction a vacuum, those cheering fans didn’t want the boo birds speaking for them.

Parsons ought to remember those supportive fans before painting the entire home crowd as the enemy, or else he’ll turn everyone against him. None of this is fair to Parsons, who has surely been frustrated with his injuries, but he can control how he reacts to the fans.