Anderson, Devereaux off hook on tax claims Non-resident ruling made

wide ramifications seen

November 07, 1997|By Jon Morgan | Jon Morgan,SUN STAFF

In a decision with important implications for professional athletes in Maryland, a hearing officer this week cleared Orioles outfielder Brady Anderson and former outfielder Mike Devereaux of claims they owed back taxes and said neither man should have been taxed as a resident.

The decision may clear up an ambiguity in Maryland's taxation of athletes, where the state had argued that many players should be taxed as residents if they keep a home here year-round.

Anderson claims residency in Nevada, where he owns a house, not Maryland, where he has an apartment with rented furniture. Devereaux owned a house in Maryland when he played for the Orioles, but considered Florida his home. Neither Florida nor Nevada tax incomes.

"It has huge ramifications for other Orioles and for players coming here," said Joseph N. Geier, an accountant and principal with the Baltimore firm of Geier Mules. He is a financial adviser to both players.

"I work with professional athletes throughout the country and this case could have affected not only them, but any taxpayer who resides in another state and has rental or vacation properties in Maryland," Geier said.

Maryland sought hundreds of thousands of dollars in back taxes from both men, and notified several other current and former Orioles players they were under investigation. The cases drew the attention of players' unions and tax advisers across the country and across pro sports.

"I think they didn't understand the situation of a baseball player. We need to keep a place so we can move in quickly," Anderson said.

He said he pays about $15,000 a month in Maryland income taxes and didn't feel it was fair for the state to declare him a resident against his will and assess more taxes. He also pays taxes in numerous other states where he plays during the season.

Anderson paid Maryland taxes based on the number of days worked in Baltimore, but not on away games or his off-season endorsement income. Many states, including Maryland, have in recent years adopted guidelines that call for athletes to pay taxes based on the number of "duty days" they serve in any given state, either playing or training.

But Maryland went one step further, applying a residency test to athletes that it imposes on entertainers and others who spend long periods here. The test, decided on a case-by-case basis, considers factors such as whether a home is owned or rented in the state and where the taxpayer votes and registers a car.

The Maryland comptroller's office, which collects taxes, notified several athletes that they may be liable for past taxes: catcher Chris Hoiles, pitchers Arthur Rhodes and Scott Erickson, and former reliever Lee Smith. Ravens players were believed to be vulnerable to similar claims.

A hearing on the Anderson and Devereaux cases was held on May 22 before a hearing officer employed by the comptroller's office. The decision, dated Tuesday and received by attorneys late on Wednesday, said the evidence showed neither man was "a statutory resident of Maryland."

The state has indicated it will drop the investigations of the other players, as well, said Neal D. Borden, an attorney with the Baltimore firm of Venable, Baetjer & Howard that was hired by the Major League Baseball Players Association union to argue the case.

He said the decision would serve as an important precedent for similar cases against athletes.

Assistant comptroller Marvin Bond said the state has not changed its policy on the tax issue.

"The decision on these two cases relates to these two cases. Other cases will be decided on a case-by-case basis," Bond said. "The issues of state taxation in a global economy are very complex."

Pub Date: 11/07/97

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