A look into why NFL (Love's) contract negotiations take SO LONG.

[Patler]

Apparently, Caleb Williams' financial and negotiating teams tried some novel approaches for their client, to minimize taxes and maximize his income. These, of course, required league review against the CBA requirements and restrictions, as well as opinions on policy implications. A couple things proposed:

- Incorporating Williams to provide services to the Bears through an LLC, with the Bears paying the LLC, not Williams directly.
- Williams receiving part of his payment as a loan to be forgiven in the future, thus delaying his payment of taxes until the loan was actually forgiven. In essence, giving him use of the total amount for a number of years, before having to meet his tax obligations.

Ultimately, the league did not approve either of these approaches. But apparently each required extensive legal review before determinations were made.

This was a "simple" contract worth only 10s of millions. I can only imagine what is involved in Love's contract worth hundreds of millions.

[MadtownPacker]

Shit doesn’t sound legal at all.

[MadScientist]

Shit doesn’t sound legal at all.

I doubt those proposals were created in a vacuum. Those are CEO style tax dodges, but it isn't legal to pay a football player like that under the CBO.

[ThunderDan]

Players are W-2 employees. They have to pay state tax in the states they play that week’s game in on top of federal taxes.

The Trump tax cut got rid of the unreimbursed business expense deduction for employees (except military). That cost my client over $40k in tax losing $175,000 plus in deductions.

Williams by being an LLC would be a business and he could deduct all of those expenses again.

I understand why he would try to push for that.

[red]

Shit doesn’t sound legal at all.

his father also said before the draft that he wanted to be made part owner of whatever team drafted his kid

that ain't legal either

elevator doesn't seem to go to the top floor with this family. thats why i think he's going to be more of a headache for the bears, then a positive

[MadtownPacker]

Going to be? He is already a headache. Hasn’t done shit and wants special treatment says it all. I’m happy to see how it is developing.

[MadtownPacker]

I doubt those proposals were created in a vacuum. Those are CEO style tax dodges, but it isn't legal to pay a football player like that under the CBO.
That’s what is surprising. The bears can’t really be this stupid to give the keys to the kingdom to this prick. Right? All this espn talk of them becoming a quality organization. This sure ass hell isn’t it.

[NewsBruin]

Players are W-2 employees. They have to pay state tax in the states they play that week’s game in on top of federal taxes.

The Trump tax cut got rid of the unreimbursed business expense deduction for employees (except military). That cost my client over $40k in tax losing $175,000 plus in deductions.

Williams by being an LLC would be a business and he could deduct all of those expenses again.

I understand why he would try to push for that.

Yeah, that's just the 2017 pass-through thingy that's on the books until 2025, right?

[Patler]

The Trump tax cut got rid of the unreimbursed business expense deduction for employees (except military). That cost my client over $40k in tax losing $175,000 plus in deductions.

Williams by being an LLC would be a business and he could deduct all of those expenses again.

I understand why he would try to push for that.

What types of expenses had pro athletes claimed previously? Was it mostly their off-season activities, like trainers, coaches, etc. and living expenses away from their homes for those activities? Their team-sponsored activity expenses in the off-season and most in-season expenses are either paid by the teams or covered under per diem reimbursements, aren't they?

[Patler]

I cannot criticize Williams' "team" for making such proposals. I can't fault them for trying to find ways to minimize his tax obligations or maximize his opportunities from the use of money by delaying his tax obligations. That's what he pays them for.

[MadScientist]

And once the proposals were made, they couldn't just dismiss them out of hand, their lawyers had to check all the relevant laws and interpretations before saying nope, and that took time. I can't really fault the Bears for not having all the information on hand for a proposal that was out of left field.

[Patler]

Things I find interesting in this story include:

- The CBA actually defines "Player Affiliate" to be any person or entity owned or controlled by, affiliated with, or related to a player.

- "Salary" is defined to include any compensation that a Player or Player Affiliate is entitled to under a Player Contract.

- "Salary" is defined to also include the amounts of loans made under a Player Contract.

It would seem that the CBA contemplates the concepts of making payments not just to a player but also to an entity (such as an LLC) owned or controlled by a player and loans made to a player; both to be included as salary under salary cap calculations.

[ThunderDan]

What types of expenses had pro athletes claimed previously? Was it mostly their off-season activities, like trainers, coaches, etc. and living expenses away from their homes for those activities? Their team-sponsored activity expenses in the off-season and most in-season expenses are either paid by the teams or covered under per diem reimbursements, aren't they?

Training, Dietitian, Supplements, Travel (any out of pocket expenses plus travel during the offseason), Membership, Meals, Agent Fees and Union Dues. That is a pretty good list to start with.

[ThunderDan]

Yeah, that's just the 2017 pass-through thingy that's on the books until 2025, right?

It isn't a pass-through thing. It is an itemized deduction thing.

It is on the books until 12/31/2025. Then it sunsets and we go back to the old laws.

[Patler]

Training, Dietitian, Supplements, Travel (any out of pocket expenses plus travel during the offseason), Membership, Meals, Agent Fees and Union Dues. That is a pretty good list to start with.

This is quite interesting. I had not previously considered how those changes affected professional athletes. The one that really jumps out to me is agent fees. After looking into it just a tiny bit, I understand that agents' fees for negotiating endorsement contracts are deductible but fees for negotiating playing contracts are not deductible. I don't see any reasonable basis for distinguishing between the two.

Agent fees. - Thats an awful lot of money that a player never sees that he has to pay taxes on.

[MadScientist]

Things I find interesting in this story include:

- The CBA actually defines "Player Affiliate" to be any person or entity owned or controlled by, affiliated with, or related to a player.

- "Salary" is defined to include any compensation that a Player or Player Affiliate is entitled to under a Player Contract.

- "Salary" is defined to also include the amounts of loans made under a Player Contract.

It would seem that the CBA contemplates the concepts of making payments not just to a player but also to an entity (such as an LLC) owned or controlled by a player and loans made to a player; both to be included as salary under salary cap calculations.

Interesting. I would guess that those provisions are in the CBA to 1) prevent teams from finding ways around the cap and 2) to allow for creating annuities for long term income that players have used before. Williams might have been able to do something like that, but he's really looking to get all the money now, but not all the tax liability now.

[ThunderDan]

This is quite interesting. I had not previously considered how those changes affected professional athletes. The one that really jumps out to me is agent fees. After looking into it just a tiny bit, I understand that agents' fees for negotiating endorsement contracts are deductible but fees for negotiating playing contracts are not deductible. I don't see any reasonable basis for distinguishing between the two.

Agent fees. - Thats an awful lot of money that a player never sees that he has to pay taxes on.

The issue is how players get paid. They get a W-2 just like most people. That means they are an employee. That limits their deduction severely right now.

Endorsement Contracts are not W-2 income. Players receive a 1099 for the income. That goes to a Schedule C and you can deduct any expenses directly against that income.

[Patler]

The issue is how players get paid. They get a W-2 just like most people. That means they are an employee. That limits their deduction severely right now.

Endorsement Contracts are not W-2 income. Players receive a 1099 for the income. That goes to a Schedule C and you can deduct any expenses directly against that income.

Ya, I understand the mechanics of it and why it ends up being that way (W-2 income vs. 1099 income), but from the aspect of the services performed by the agent for the player, it's not really all that different for the two contracts. This hits the "run of the mill" athlete hard. Agent fees are significant, and the lower part of the roster isn't getting huge endorsement contracts anyway. The impact on them was significant.

[Tony Oday]

I am pretty sure most states and municipalities have "Jock Taxes". I do not see how they do not have the availability to be a 1099 employee, start and S Corp except this is how the NFL negotiated with DC scum to make sure they still send money to the corrupt government.

[Tony Oday]

The issue is how players get paid. They get a W-2 just like most people. That means they are an employee. That limits their deduction severely right now.

Endorsement Contracts are not W-2 income. Players receive a 1099 for the income. That goes to a Schedule C and you can deduct any expenses directly against that income.

I cannot imagine any athlete putting money into a sole proprietorship and instead put it in an S Crop, so if they can deduct the fees for agents, managers and staff.

[ThunderDan]

I cannot imagine any athlete putting money into a sole proprietorship and instead put it in an S Crop, so if they can deduct the fees for agents, managers and staff.

Sole Prop and S-Corps can both deduct all business expenses against income. Both come to the same bottom line number. It is when the income comes on a W-2 that the issues start to arise.

[ThunderDan]

I am pretty sure most states and municipalities have "Jock Taxes". I do not see how they do not have the availability to be a 1099 employee, start and S Corp except this is how the NFL negotiated with DC scum to make sure they still send money to the corrupt government.

Not true. Most states want to get paid on money that is earned in their state.

Doesn't matter if you are an athlete or a construction company. If you go into a state, they are going to want to get paid.

The tax law was probably already in effect way before the NFL started generating revenue anywhere near to what it is today.

[ThunderDan]

This all falls under Nexus rules. Each state has different rules and regulation regarding how much triggers a filing requirement and possible tax owed.

Of course, some states have no income tax at all.

[ThunderDan]

Sole Prop and S-Corps can both deduct all business expenses against income. Both come to the same bottom line number. It is when the income comes on a W-2 that the issues start to arise.

Well not exactly true, as an S-Corp owner you have to take reasonable compensation on a W-2.

The number before you consider the W-2 and associated payroll tax expense should be the same.

[red]

TD's lost it

he's now resorted to correcting himself

[MadtownPacker]

TD's lost it

he's now resorted to correcting himself
As long as we keep it about football and don’t cross that fine line….

[Fritz]

As long as we keep it about football and don’t cross that fine line….

This thread ain't exactly about football - I feel as if I'm in a room with a bunch of tax and finance experts discussing the ins and outs of capital market value versus deductible fee add-ins, or whatever this all is. Impressive, but way beyond my ken. Which means it could be political and I wouldn't even know it.

The only part I understood were the posts that hope this all signifies that Williams will be a problem child and the Bears will still suck.

[MadtownPacker]

This thread is completely about football. The tax discussion is about what williams is trying to do. Everyone has been doing fine and no one said “politics” until you did.

[Fritz]

My point was that this is some high-level discussion here, and I'm out of my depth when these guys start rolling. They could be talking in Polish about bamboo floors and I'd understand just as little.

Buy I DO understand that we all hope the Bears still suck.

[Tony Oday]

Well not exactly true, as an S-Corp owner you have to take reasonable compensation on a W-2.

The number before you consider the W-2 and associated payroll tax expense should be the same.

Thats true so he would be smart to put President as his role so he can make what he wants commiserate to the same revenue sized companies. In the end the guys a bust so he should make sure he saves his guaranteed cash, Because THE BEARS STILL SUCK

[Teamcheez1]

I hope that Love realizes that with an exorbitant contract, anything less than a SB and he will be considered a failure by Packers standards.

[Rastak]

I hope that Love realizes that with an exorbitant contract, anything less than a SB and he will be considered a failure by Packers standards.


He'll most likely understand that, being with the team for a few years. He'll have some self reflection every time he cashes a check and smiles.

[red]

This thread ain't exactly about football - I feel as if I'm in a room with a bunch of tax and finance experts discussing the ins and outs of capital market value versus deductible fee add-ins, or whatever this all is. Impressive, but way beyond my ken. Which means it could be political and I wouldn't even know it.

The only part I understood were the posts that hope this all signifies that Williams will be a problem child and the Bears will still suck.

i agree with you

fascinated by the info that i don't understand

[Fritz]

I do wonder what they'rehaggling over - how the money is paid - in what form? Bonuses, salary, what? Length of contract? How much complementary auyahuasca is to be included? Is Guter angling for an invite to Love's wedding?

[Joemailman]

I do wonder what they'rehaggling over - how the money is paid - in what form? Bonuses, salary, what? Length of contract? How much complementary auyahuasca is to be included? Is Guter angling for an invite to Love's wedding?

I know some recent huge contracts have included some guaranteed base salaries for future years. The Packers have always been very reluctant to do that. Trevor Lawrence's contract, which I don't totally understand, is for 275M of over 5 years with a total of 200M guaranteed.

[Patler]

Some of the delay may have been caused by the team working out details of Clark's extension. A number of years, ago one of the agents commented that each team only has a couple of guys who handle contract discussions. Agents know that sometimes they just have to wait for a team's negotiators. They can have preliminary discussions and submit proposals, but may have to wait to finalize details.

[MadtownPacker]

I do wonder what they'rehaggling over - how the money is paid - in what form? Bonuses, salary, what? Length of contract? How much complementary auyahuasca is to be included? Is Guter angling for an invite to Love's wedding?
Maybe there are social clauses that are being discussed? It wouldn’t be unfair for the high amount many get paid.

[Rastak]

I know some recent huge contracts have included some guaranteed base salaries for future years. The Packers have always been very reluctant to do that. Trevor Lawrence's contract, which I don't totally understand, is for 275M of over 5 years with a total of 200M guaranteed.

This is my best guess right here.

[Fritz]

Maybe there are social clauses that are being discussed? It wouldn’t be unfair for the high amount many get paid.

No doubt the real hangup is that Guter wants video from the wedding night but Love's camp is only willing to provide pictures.

[MadtownPacker]

No doubt the real hangup is that Guter wants video from the wedding night but Love's camp is only willing to provide pictures.It could be worse:


https://youtu.be/1mda8RzL2Y0?si=jaXNg8EpXvdcFQLr

[Fritz]

Maybe Guter could channel his inner Peter Sellers as Chauncey the Gardener: “I like to watch.”