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In a nearly unanimous decision, the Pennsylvania Supreme Court held that the City of Pittsburgh's (City) 3% tax on income earned by City nonresidents while performing at one of its publicly funded sports stadiums, the so-called “Jock Tax,” was unconstitutional because it discriminated against nonresidents in violation of the Uniformity Clause of the Pennsylvania Constitution.1 Five Justices joined in the majority opinion, and two separate concurrences were issued.
Under the Local Tax Enabling Act (LTEA), a second-class city with a publicly funded sports stadium or arena could enact a facility usage fee upon those nonresident individuals who use such a facility to engage in an athletic event or otherwise render a performance where they are remunerated. According to the enabling statute in the LTEA, Pittsburgh, the only second-class city in Pennsylvania, could set the facility fee at a defined flat dollar amount, or it could tax a percentage up to 3% of the income earned at the publicly funded stadium. Pursuant to this authority, Pittsburgh enacted a 3% tax on all income earned by City nonresidents while performing at any of the City's three publicly funded sports venues (the Nonresident Sports facility Usage Fee, or facility fee). Residents of the City were not subject to the facility fee, but were instead subject to the City's 1% Earned Income Tax (EIT), plus a 2% school district tax. As a result, both residents and nonresidents were subject to a 3% tax on their income earned in the City, but the taxes imposed were different.
The plaintiffs, who were professional athletes and players' associations, challenged the facility fee on the grounds that it violated the Uniformity Clause because it treated nonresident athletes and performers who paid the 3% facility fee less favorably than similarly situated resident athletes and performers who paid 1% income tax via the EIT. The City argued that the facility fee was constitutional because the burden imposed on residents and nonresidents was the same, since both resident and nonresident athletes and performers paid the same total effective tax rate of 3%.
Both the trial court and the Commonwealth Court held that the facility fee was unconstitutional on the grounds that it unjustifiably imposed a different tax burden on nonresidents of the City versus residents. In so holding, the courts analyzed the income tax burden imposed by the City, not the overall tax burden imposed by the City and the school district together.2
On appeal, the Pennsylvania Supreme Court agreed that the facility fee was unconstitutional because it unjustifiably imposed unequal tax burdens on nonresidents versus residents. Under the Court's Uniformity Clause jurisprudence, absent a legitimate distinction between classes of taxpayers, the imposition of unequal tax burdens upon similarly situated taxpayers is unconstitutional. In this case, the Court affirmed that residency cannot be a basis for imposing unequal tax burdens. It followed the courts below in comparing only the tax burdens imposed by the City through its facility fee and the EIT. The Court stated that “a city cannot use a tax which, of necessity, only applies to residents to cover up the discriminatory effect of a separate, disuniform tax on nonresidents.” In other words, the City could not rely on the school district tax, which only applied to residents, as a justification for an income tax scheme imposed through the facility fee and EIT that had a discriminatory effect on nonresident athletes.
The Court was unpersuaded by the City's reliance on Minich v. City of Sharon, 77 A.2d 347 (Pa. 1951). The tax in Minich was imposed at the same rate on both residents and nonresidents, and permitted a credit against the tax for both residents and nonresidents for any other like tax imposed by a separate taxing authority. The tax was upheld on the grounds that it did not actually discriminate based upon residency because it applied at the same rate to residents and nonresidents, and that allowing a credit against the payment of tax for taxes paid to some other governmental authority was not a violation of uniformity, even if it resulted in different effective tax rates for different taxpayers residing in different school districts. In this case, unlike in Minich, the facility fee only applied to nonresidents, and it applied at a higher rate than the EIT.
Justice Donohue (joined by Chief Justice Todd) and Justice Mundy agreed with the majority opinion, but for a different reason. Unlike the majority, they analyzed the overall burden of the City and school district taxes together to determine whether the City's tax scheme had a discriminatory result, and they concluded that the City's denial of a credit to nonresident athletes was sufficient to render the facility fee unconstitutional. As Justice Donohue stated in her concurring opinion: “Even if the tax itself is applied neutrally by saddling both residents and nonresidents with a tax burden of three percent, the City's decision to foreclose nonresidents from receiving a credit prevents the overall taxing scheme from operating neutrally, as it has the disparate effect of forcing only nonresident athletes to be subject to double taxation.” As such, while the entire Court agreed that the facility fee was unconstitutional, there is a split in the analysis of how to determine whether a taxing scheme has a discriminatory result.
Footnotes
1. National Hockey League Players Association v. City of Pittsburgh, __A.3d ___, 2025 WL 2745552 (Pa. 2025).
2. See Danyluk v. Bethlehem Steel Co., 178 A.2d 609 (Pa. 1962).
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