Paying a player taxes

Discussion in 'The Business of Hockey' started by LeHab, Jul 9, 2006.

  1. LeHab

    LeHab Registered User

    Joined:
    Aug 31, 2005
    Messages:
    11,193
    Likes Received:
    848
    Trophy Points:
    169
    Would it be allowed under the new CBA for a team to pay their players taxes (or at least part of it) without it being counted as a cap hit ?

    For exemple : player A gets a 4 million/year contract but the team also agrees to pay his taxes. This means, Player A gets a net 4 million into his pocket but the team will have to pay in total ~6 millions.
     
  2. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

    Joined:
    Feb 27, 2002
    Messages:
    5,136
    Likes Received:
    59
    Trophy Points:
    146
    i think the govt would have a problem with it, as technically the portion of the paid taxes would in fact be unaccounted income.

    also, i belive the CBA specifically denies any forms of compensation outside of the players salary.

    although, i fail to see how they could have any jurisdication if for example the owner of a team were to hire the players wife to work for one of this other companies at an "agreed" price.
     
  3. Irish Blues

    Irish Blues Still on hiatus

    Joined:
    Dec 15, 2002
    Messages:
    21,801
    Likes Received:
    1
    Trophy Points:
    169
    Occupation:
    Actuary
    Answer: no.

    Without even looking, I think the CBA prevents a team from paying the player's taxes in the first place ... but our resident CBA expert (kdb209 - yes, you're now appointed to that position) will be along shortly to give the details.
     
  4. Wetcoaster

    Wetcoaster Guest

    No. Unless specifically allowed under the CBA as a payment to player it will be considered a circumvention.

    See "Article 26 - No Circumvention". In particular 26.3 (e) which provides that a club may not directly or indirectly provide any player "with anything of value" other than his salary and bonuses set out in his Standard Player Contract and share of benefits as set out in the CBA.

    Examples of circumvention are set out at 26.15 and include:

    "(b) A Club has an agreement to pay money or anything else of value to a player not expressly permitted by this Agrrement, or makes such a payment to a player."

    This would include an agreement during a player's active career to pay a player for future services after a player has retired. See 26.15(e).

    Basic rule - if it is not specifically permitted in the CBA you cannot do it and as noted in the CBA a "Circumvention" may be inferred from the surrounding circumstances.
     
  5. Son of Steinbrenner

    Son of Steinbrenner Registered User

    Joined:
    Jul 9, 2003
    Messages:
    10,055
    Likes Received:
    0
    Trophy Points:
    0
    What if a team pays a players wife? Lets say the Rangers after giving Shanahan 4 million a year choose to pay his wife (no idea if he is a married but lets say he is) 2 million a year as a scout?
     
  6. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

    Joined:
    Feb 27, 2002
    Messages:
    5,136
    Likes Received:
    59
    Trophy Points:
    146
    or even in an unrelated company. the NHL surely wouldnt have the jurisdiction to audit a private company to determine if their payroll is clean and inline.

    frankly, i doubt any owner goes out of this way in this manner, but just saying, how could the NHL prevent it or even know it happened?
     
  7. Wetcoaster

    Wetcoaster Guest

    All agreements a club and/or a player enter into must be disclosed even those specifically permitted by the CBA such as endorsements.

    That would be likely be considered an indirect payment and would be prohibited per Article 26.3 (a) - Clubs or Club Actors (entering into agreements which may have the effect of defeating the salary cap) and (b) Players or Player Actors entering into agreements which may have the effect of defeating the salary cap, team payroll range or free agency. If she was in fact a bona fide scout then an exception might be available if the agreement was reported but that seems highly unlikely.

    Also 26.3(d) provides that no club or club actor or player or player actor may commit any act through a third party (for example a wife) where if such activity were attributed to the club or player himself would constitute a circumvention. Such activities carried out or even attempted to be carried out shall be then attributed to the club and/or player as the case may be and then the quite severe penalties for circumvention or attempted circumvention would kick in such as fines (minimum $1 million up to $5 million which also reduces a club's next year's salary cap by a like amount) and loss of draft picks for clubs and for the player forfeiture of the value of the agreement as well as fines of the lesser of $1 million or 25% of his salary. Player contracts and extensions may be voided

    Also the Commissioner has complete authority to strip as many draft picks as he thinks approriate in any year or years and even declare whatever games affected by the circumvention to be forfeit. The player, player agent or club employees guilty of circumvention can be suspended for whatever time the Commissioner determines in his absolute discretion.

    BTW failing to report any fact or circumstance by clubs. players and/or agents that MIGHT be a circumvention, is also classed as circumvention and subjects the club, agent and/or player to penalties.

    Player agents must file a yearly certificate that they have no knowledge of any agreement, fact or circumstance or any proposed action which might be considered a circumvention per article 26. Failure to file costs an agent his certification and therefore he is unable to represent players. The new CBA brings agents under this system.

    Similarly GM's, Chief Financial officers and Club Presidents must file a similar certificate or lose their jobs. This also applied to Clubs who must file through on of its Governors.

    There are Investigators (the NHL commissioner or the Executive Director of the NHLPA) who can start an investigation on any grounds either on their own initiative or in response to a complaint from any party. The finding of the Investigator is not binding on a System Arbitrator who hears the case.

    System Arbitrtator can order complete disclosure of any and all documents and information to the Investigator related to the circumvention being investigated including tax records, e-mails, any income or revenue information of the player or clube, etc.

    There are independent judges (System Arbitrators) who determine if there has been a circumvention or attempted circumvention of the system. The System Arbitrator is permitted to consider direct or circumstantial evidence and even conclude that there is no reasonable explantion for aterm or an agreement other than circumvention.

    The language on this is pretty tight and well-tested as this has been in force in similar contract language in the NBA and NFL for a number of years.

    I do not think that clubs or players will want to ake a chance of being found to have circumvented the system - it is just too expensive. And failure to report can cost agents, players and club personnel their jobs as well as money.
     
  8. Wetcoaster

    Wetcoaster Guest

    See my post above.
     
  9. kdb209

    kdb209 Registered User

    Joined:
    Jan 26, 2005
    Messages:
    16,271
    Likes Received:
    5
    Trophy Points:
    126
    Well, Wetcoaster has already done a more than admirable job in addressing this, so I guess I'll have to delegate my title for the day.

    I guess that's what I get for staying offline all day untill I could finally get around to watching my Tivo-ed World Cup Final - more proof that shootouts are a horrible idea, but finally some goalies who are worse in shootouts than the Sharks'.

    But, to keep up my cut-and-paste skills:

    Among the heavy handed punishments the league can hand out against teams - fines up to $5M (which count against the cap), loss of draft picks, and forfeiture of games.
    Article 26 gives a lengthy, non-exhaustive list of circumvention examples.

    Hiring Shanahan's wife as a $2M/yr scout would definitly fall under example 26.15 (f):
     
  10. LeHab

    LeHab Registered User

    Joined:
    Aug 31, 2005
    Messages:
    11,193
    Likes Received:
    848
    Trophy Points:
    169
    Thanks! I was suspecting that it was not possible since I have not heard anyone doing it yet. :)
     
    Last edited: Jul 10, 2006

Share This Page

monitoring_string = "358c248ada348a047a4b9bb27a146148"