Daily Tax Report: State

UFC Fighters Face Big Hit From California ‘Jock Tax’ (1)

Dec. 27, 2018, 7:25 PMUpdated: Dec. 27, 2018, 11:00 PM

Ultimate Fighting Championship participants could take a major hit this weekend thanks to a last-minute scheduling change that will likely force them to pay California’s “jock tax.”

UFC 232 was scheduled to take place in Las Vegas on Dec. 29, but the venue was changed to Los Angeles after one of the headlining fighters wasn’t cleared to participate in Nevada due to a doping test that showed low levels of a banned substance. California’s top tax rate is the highest in the nation at 13.3 percent, and it applies to any income over $1 million, according to an attorney familiar with the tax structure.

The UFC should make sure the burden isn’t placed on the participants, according to Lucas Middlebrook, a labor and employment attorney who represents professional fighters.

“The UFC should ‘true up’ all purses to account for the unexpected increase in taxation caused by the last minute move to California which subjects the fighters to the non-resident taxation requirements,” Middlebrook told Bloomberg Tax via direct message. “The intent would be to increase the purses upward so the fighters take home the same (or nearly identical) amounts as they would have in Nevada.”

Middlebrook, who serves as counsel to Project Spearhead, an association of professional mixed martial artists, says the fighters aren’t unionized and that a collective bargaining agreement could prevent problems like this in the future.

The UFC controversy comes less than two years after it was reported that some players in the Super Bowl 50 championship might lose money playing in the event due to tax implications in California.

Fighters Speak Out

The California tax issue was elevated to national attention by the fighters themselves, some of whom voiced their concerns on Twitter. “Well... wasn’t expecting to pay California state taxes this Holiday season,” Brazilian mixed martial arts fighter Amanda Nunes, the reigning UFC Women’s Bantamweight champion, said Dec. 24.

In response, UFC strawweight fighter Nina Ansaroff tweeted, “There goes my new car….”

The fighters could make from $10,000 to more than $500,000 at the event, which means the top bracket of participants could be forced to surrender about $56,000 to $65,000 of their winnings depending on their annual income in the state, according to Middlebrook.

After initially declining comment, the UFC addressed the issue during an afternoon press conference Dec. 27. Dana White, president of the UFC, said the organization won’t compensate fighters for any increased California taxes. Asked about the jock tax and increased medical cost, he said, “Who’s going to pay my income tax?”

“It is what it is. It’s either that or not fight,” White told reporters. “It’s costing everybody more money.”

(Adds comments from UFC president Dana White in paragraphs 10 and 11. )

To contact the reporter on this story: David McAfee in Los Angeles at dmcAfee@bloomberglaw.com

To contact the editor responsible for this story: Jeff Harrington at jharrington@bloombergtax.com

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