The Pennsylvania Supreme Court confirmed that residency cannot be a basis for imposing unequal tax burdens. This directly affects Pittsburgh's 3% tax on income earned by nonresidents performing at one of its publicly funded stadiums.
In a rare, nearly unanimous decision, the Pennsylvania Supreme Court held that the City of Pittsburgh’s (the City) 3% tax imposed on income earned by city nonresidents performing at one of its publicly funded sports stadiums unconstitutionally discriminated against nonresidents in violation of the Uniformity Clause of the Pennsylvania Constitution.1 Of the seven justices on the court, five joined in the majority opinion, with two separate concurrences issued.
Commonly called the “Jock Tax” or “Facility Fee,” the tax was imposed pursuant to the authority granted to the city under the Local Tax Enabling Act (LTEA), which permits a second class city with a publicly funded sports stadium or arena to enact a facility usage fee upon nonresident individuals who used such facility for an athletic event or otherwise render a performance where they are remunerated. The facility fee could be imposed at a defined flat dollar amount or it could tax a percentage up to 3% of the income earned at the publicly funded stadium. Pittsburgh enacted the Jock Tax as a 3% tax on all income earned by city nonresidents while performing at any of the city’s three publicly funded sports venues. Residents of Pittsburgh were not subject to the 3% Jock Tax, 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 total of 3% tax on income earned in the city, but the taxes imposed were different.
The plaintiffs challenging the tax – professional athletes and players associations – disputed the Jock Tax on the grounds that it violated the Uniformity Clause because it unjustifiably treated nonresident athletes and performers who were required to pay the Jock Tax less favorably than resident athletes and performers who paid 1% income tax via the EIT. Pittsburgh argued that the Jock Tax 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%.
On appeal, the Pennsylvania Supreme Court agreed that the Jock Tax was unconstitutional because it unjustifiably imposed unequal tax burdens on nonresidents versus residents. The court affirmed that residency cannot be a basis for imposing unequal tax burdens in Pennsylvania. It followed the lower courts’ view of comparing only the tax burdens imposed by Pittsburgh through its Jock Tax and the EIT, not the overall tax burden imposed by the city and the school district together.2 The court held that the city could not rely on the school district tax, which only applied to residents, as a justification for an income tax system imposed through the Jock Tax and EIT that had a discriminatory effect on nonresident athletes.
While the entire court agreed that the Jock Tax was unconstitutional, there was a split in the analysis of how to determine whether or not a tax plan has a discriminatory result. Justice Donohue (joined by Chief Justice Todd) and Justice Mundy concurred that the Jock Tax was unconstitutional. Unlike the majority, they analyzed the combined effect of the city and school district taxes together to determine whether the city’s tax plan had a discriminatory result. They concluded that Pittsburgh’s denial of a credit to nonresident athletes was sufficient to render the Jock Tax unconstitutional because it effectively prevented the overall taxing scheme from operating neutrally, as it has the disparate effect of forcing only nonresident athletes/performers to be subject to double taxation.
The split in the court’s reasoning illustrates the complexity and nuance of Uniformity Clause analysis as well as the challenges of determining what constitutes an unconstitutionally unequal tax burden.
1 National Hockey League Players Association v. City of Pittsburgh, __A.3d ___, 2025 WL 2745552 (Pa. 2025).
2 Danyluk v. Bethlehem Steel Co., 178 A.2d 609 (Pa. 1962).
Dan A. Schulder is an equity partner at Cozen O’Connor in its Harrisburg office, who focuses his practice on state and local tax matters. He can be reached at dschulder@cozen.com.
Heidi R. Schwartz is Of Counsel in the Philadelphia office of Cozen O’Connor. She also focuses her practice on state and local tax matters. She can be reached at hschwartz@cozen.com.
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