Yesterday we sat down to talk with Mitchell Halpern about his early career in the Sports Law industry. Today we will discuss certain tax issues and how he built the Sports and Entertainment division at O’Connor and Drew.

SLT - Please tell us a little about your career path after you left Bob Woolf Associates.

MH - At that time I had tax skills and a law degree. I could do tax and estate planning work. I went to work with O’Connor & Drew, a regional accounting firm. They provided me an opportunity to build a sports and entertainment tax practice. First, and foremost, my responsibilities were to service their existing clients, but I was allowed the time to build a sports and entertainment tax practice.

SLT - How did you build the sports and entertainment tax practice at O’Connor & Drew?

MH - The first thing I did was join the Sports Lawyers Association (“SLA”). This provided me with some unique educational opportunities, as well as the chance to network with others in the sports law field. While attending SLA conferences, I sought out agents/attorneys with clients in the Massachusetts area who might need help with their tax work. One of the contacts I made was California based lawyer-agent Gary Uberstine, who was also the editor of THE LAW OF PROFESSIONAL AND AMATEUR SPORTS. I asked him if he was interested in having a chapter in his book on state and local taxation of professional athletes. I was then able to write that chapter for his book. Through these steps I started to build my practice.

SLT - Are there any interesting stories that you can tell us about the process of building your practice?

MH - In the late 1990’s, I had approximately 9 New England Patriot players as clients. After preparing one player’s tax returns, he ended up with a sizable tax refund. Although part of the reason for this refund was maximizing his legitimate deductions, he was also significantly over withheld, the result of poor, or no, tax planning (he became a client after the end of the tax year, so I had no opportunity to do any tax planning for that year). He and his wife were so happy with their refund that they wanted to have some of his teammates meet me. They held a dinner party and invited me, along with five other players. Out of these five players, I got three new clients. Opportunities like this, referrals from a teammate, are rare, but fruitful when they do happen.

SLT - Can you discuss some of the multi-state tax issues that athletes face?

MH - One of the biggest tax problems an athlete faces is that he/she has to file returns in multiple states, whereas the average person usually just has to file one state and one federal return. Some states are more “aggressive” at taxing professional athletes and “chasing down” those that don’t file returns than others. There also used to be several different ways states would calculate a team sport athlete’s income earned in their state (i.e. “duty days” and “games played” formulas being the primary two methods). However, most states that tax nonresident professional athletes have now adopted the duty days formula, based on a fraction of the number of days the player was in that state over total duty days spent everywhere. You will have some athletes that will have to file 16 to 20 state returns, along with his federal return.

SLT - Do you ever get involved with a team or agent in the negotiation of a contract?

MH - I have on one occasion. We were dealing with a residency issue on a signing bonus. We were trying to meet the requirements of a “true” signing bonus within the state’s regulation for taxation of nonresident professional athletes (Since the Barry Sanders contract situation from some time ago, most “true” signing bonuses have disappeared since one of the requirements is that the bonus be nonrefundable). If the signing bonus met the requirements of a “true” signing bonus, it would be taxable in the state of residence only and not allocated to any nonresident states in which the athlete played. In this case, the player was a Texas resident, which had no state taxes, but his home team was in a different, taxable state. The benefit of creating language that supported a “true” signing bonus is that the signing bonus would then “escape” state taxation altogether. I was given the opportunity by the players attorney/agent to work out the language for the signing bonus with the team negotiator.

SLT - Do you feel it is important to for a tax preparer to have a strong knowledge of professional sports to do the best job for a pro athlete?

MH – I have found that knowledge of a particular industry always helps you do a better job for a client. This is no different for professional athletes. You can do a better job for your clients if you understand their business. I understand nuances of how athletes are paid and the type of “ordinary and necessary” expenses they incur. I know what information to ask for and I can then maximize their legitimate deductions.

SLT - Tell us a little about your sports and entertainment tax practice today.

MH – I continue to do approximately 30 – 40 athlete returns annually. Some relationships are directly with the clients, while some others are through the athletes’ professional advisors (agents and financial advisors). A good part of my practice can be traced to the friends I have made over the years by attending and networking at conferences, like the annual Sports lawyers Association Conference. I am also now very active in a relatively young organization called the Sports Financial Advisors Association (“SFAA”). This is an organization of financial professionals that work with , or want to work with, professional athletes. It too focuses on an annual conference where professionals have an opportunity to learn and network.

SLT - Thanks for sharing your experience, anecdotes, and advice.

To Contact Mr. Halpern:

Mitchell S. Halpern, JD
Principal
Director of Sports & Entertainment Accounting Services
O'Connor & Drew, P.C.
1515 Hancock Street
P.O. Box 9109
Quincy, MA 02169

Fax: (617) 472-7560
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