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LEAGUE, UNION SCRAMBLING OVER DEFERRED COMPENSATION
Posted by Mike Florio on December 11, 2008, 8:51 p.m.
A league source tells us that the NFL and the NFL Players Association are hustling to deal with a thorny tax situation that could require players to pony up significant payments to the IRS, absent revisions to their contracts.
This development was first reported earlier in the day by Jason Cole of Yahoo! Sports. (We thought we were breaking this one, until we did a little Googling to learn more about Section 409, at which point we found Cole’s report, muttered “Newman,” and then realized that we should acknowledge Cole’s report, lest he eventually shout out “Landry!”
The issue arises from Section 409A of the Internal Revenue Code, which applies to certain types of deferred compensation. Under Section 409A, deferred compensation must be included in taxable income in the year the compensation was earned, unless the arrangement meets certain requirements.
The problem arose because the NFL recently informed the NFLPA that contracts have not been written or revised to comply with Section 409A.
As a result, if contracts containing deferred compensation are not restructured by December 31, some players will have to include money not yet paid within their taxable income calculation for 2008, and/or pay an additional tax of 20 percent.
The NFL and the union have agreed that any renegotiation undertaken to comply with Section 409A won’t count as a “renegotiation” under the Collective Bargaining Agreement, which basically means that it won’t impact the players’ ability to engage in future renegotiations.
We’re told that the provision also is expected to affect other major league sports.
Permalink | 3 Comments Back to Top
(I think this is the reason why Colombo's deal isn't done. I've read that the holdup was due to some tax situation. So this makes sense to me)
Posted by Mike Florio on December 11, 2008, 8:51 p.m.
A league source tells us that the NFL and the NFL Players Association are hustling to deal with a thorny tax situation that could require players to pony up significant payments to the IRS, absent revisions to their contracts.
This development was first reported earlier in the day by Jason Cole of Yahoo! Sports. (We thought we were breaking this one, until we did a little Googling to learn more about Section 409, at which point we found Cole’s report, muttered “Newman,” and then realized that we should acknowledge Cole’s report, lest he eventually shout out “Landry!”
The issue arises from Section 409A of the Internal Revenue Code, which applies to certain types of deferred compensation. Under Section 409A, deferred compensation must be included in taxable income in the year the compensation was earned, unless the arrangement meets certain requirements.
The problem arose because the NFL recently informed the NFLPA that contracts have not been written or revised to comply with Section 409A.
As a result, if contracts containing deferred compensation are not restructured by December 31, some players will have to include money not yet paid within their taxable income calculation for 2008, and/or pay an additional tax of 20 percent.
The NFL and the union have agreed that any renegotiation undertaken to comply with Section 409A won’t count as a “renegotiation” under the Collective Bargaining Agreement, which basically means that it won’t impact the players’ ability to engage in future renegotiations.
We’re told that the provision also is expected to affect other major league sports.
Permalink | 3 Comments Back to Top
(I think this is the reason why Colombo's deal isn't done. I've read that the holdup was due to some tax situation. So this makes sense to me)
