David Tepper talks about the Carolina Panthers being a North and South Carolina team
When Carolina Panthers players and staff get their first paychecks as South Carolina employees at the team’s new Rock Hill campus, their eyes may pop when they see less money than usual.
That’s because the top state income tax rate in South Carolina is 7 percent, as opposed to North Carolina’s 5.25 percent.
While “regionalizing” a team by spreading its physical presence across two states has its perks, navigating the tax complexities brings challenges. Even though team employees will see a bigger chunk of their paychecks taken out as a result of the move, there are some ways that tax hike could be offset.
As a team, the Panthers will reap the benefit of $115 million in tax incentives to subsidize the construction of the team’s new offices and practice fields, thanks to a bill that’s expected to be signed by Gov. Henry McMaster this month.
South Carolina won’t write the Panthers a check for $115 million outright. Instead, the team will get a credit from the state for the payroll taxes it pays on employees’ salaries for the next 15 years, as long as it spends the money on the proposed campus along Interstate 77. The Panthers want to break ground on the facility this year and move in by early 2022, The State reported Thursday.
As the bill moves toward law, players and other team employees shouldn’t be surprised by future changes in their paychecks, and should start thinking of ways to make up the extra money they will pay in taxes elsewhere — a conversation already being had by some in the Panthers locker room, a source told the Observer.
That can start with deciding where to live.
Where do you live, when it’s ‘two states, one team’?
Panthers tight end Chris Manhertz recently bought a home in Rock Hill, according to Derek Copeland, the CEO of Silverrock Wealth Partners and financial adviser to several NFL players, including Manhertz.
“A guy like Chris, a smart guy who looks at the details, (says), ‘I’ve got a 30-minute commute no matter where I am ... And my cost of living is 15-20% less,’” Copeland said. “It’s 30-35% cheaper from a housing perspective in South Carolina than it is in North Carolina, and then you see it when you drive over the border and you’re paying 20, 30 cents per gallon less on gas.”
He’ll also save a little on property taxes. Mecklenburg County and the city of Charlotte have a proposed property tax rate that totals 96.5 cents per $100 of assessed value following the recent local revaluation. That means that the annual tax bill on a $500,000 house would be $4,825.
In York County, property taxes are calculated somewhat differently using something called millage rates, which are adopted annually by local governing bodies. Using the state’s tax calculation, the tax bill for a $500,000 house in Rock Hill would be about $4,574.
A shorter commute time to a South Carolina facility could also appeal to many players, which could inspire a move to an area closer to the planned development.
But for players who own their homes in Charlotte and have families in the area, it might not make sense to move to Rock Hill despite being closer to the future facility.
Safety Colin Jones and his wife bought a house in south Charlotte earlier this year, property records show. Linebacker Shaq Thompson bought a condo in South End with his girlfriend last year as they welcomed a new baby. Tight end Greg Olsen, his wife Kara and their children live in South Park.
Hypothetically speaking, if Olsen or those players are still Panthers by the time the team moves to South Carolina and they choose to live in Charlotte, they would pay both an increased income tax rate for being South Carolina employees, plus the higher property tax rate in Mecklenburg County while still commuting to Rock Hill.
But having an established family in Charlotte would make moving to save a bit on property taxes each year more difficult.
Young players eager to experience a large city may opt for Charlotte. In either area, it might make sense for players with shorter-term contracts to rent instead of buy.
Manhertz ultimately felt that his commute from other neighborhoods in which he considered buying a house, like South Park or Ballantyne, to the Panthers’ uptown Charlotte headquarters would be about the same as his commute from Rock Hill — so that wasn’t a factor in his decision. Neither was family, because Manhertz doesn’t have any in the area.
And, Copeland said, Manhertz saw how rapidly Rock Hill has been developing in recent years and felt he could ultimately turn the house into an investment in itself.
Such a move could appeal to players in similar situations as Manhertz — who represents the majority of NFL players as a middle-roster, middle-salary player trying to make the most of his salary while he can.
“If I was a 20-something-year-old guy with no kids, and I was just looking to maximize my bottom-line income, which is what I could save and invest ... I’d make the same decision,” Copeland said. “Because guess what? If Chris moves on, moves somewhere else, he’s going to hold onto that house and rent it out.”
‘Jock tax’ and ‘duty days’
From a cost of living perspective, a move to South Carolina would be financially advantageous for players, coaches and other highly paid employees, said CPA Steven Goldstein of Grassi & Co. in New York, who provides tax consultation to professional athletes.
The salaries of highly paid employees who travel (like coaches) are taxed in the locations where games are played, thanks to a levy commonly referred to as the “jock tax.” That means the Panthers would be taxed by the state in which they played for 10 away games, and by North Carolina for the 10 they play in Charlotte at Bank of America Stadium, including preseason.
Under the proposed bill, South Carolina wouldn’t benefit from this specific tax, since the team won’t play any games in that state.
It’s not clear yet how many “duty days” are taxable to the state. States use duty days — calculated by figuring out how much time athletes engage in income-attributable work — to determine how much of an athlete’s total earnings are attributable to that state, according to the Tax Foundation, a Washington, D.C. think tank.
Regardless, North Carolina will lose most of the players’ state income tax revenue because of the move, according to Evan Waxman, co-chair of the athletes and entertainment practice at EisnerAmper, a New York accounting firm.
Panthers players were already being taxed for the time spent in South Carolina for training camp at Wofford College in Spartanburg each year — up to two weeks of duty days taxable by the state of South Carolina.
For example, Panthers starting linebacker Luke Kuechly makes about $12.5 million annually through 2021.
So Kuechly, who practiced 14 days in South Carolina — thus was taxable through that period by the state — paid approximately $72,000 in S.C. taxes just for training camp.
Regardless, a person must work 183 days in a state per year to qualify as a resident and taxpayer of that state.
Other future challenges and opportunities
Player bonuses are subject to the state’s income tax in which the team is headquartered and practices.
Christian McCaffrey’s $10 million signing bonus in 2017 was taxed in North Carolina, for example, for approximately $525,000 in state taxes. That amount would have been $700,000 had it been taxed in South Carolina — and future bonuses in the state would be subject to that tax.
But possible investment opportunities adjacent to the project could help players make up that money.
Panthers Chief Operating Officer Mark Hart recently told The State that team owner David Tepper is “thinking big” in terms of the infrastructure of the practice facility, which would include hotels and a medical center as well as restaurants and shopping areas.
Such projects can spur a ripple effect of growth around it; if there are employees staffing a hospital, new restaurants could pop up to feed those employees, for example.
Rock Hill Mayor John Gettys said the Panthers’ headquarters will provide a boost to the region — from supporting small business growth to spurring demand in the service industry.
“The old saying ‘a rising tide lifts all boats’ … really is what we’ll see here,” Gettys said.
Gettys said the Panthers are finalizing the contracts on the land in Rock Hill, which the State has reported to be off I-77 between Dave Lyle Boulevard and Eden Terrace.
That’s not in an opportunity zone, which is “designed to encourage long-term private investments in low-income communities,” and is not taxed for capital gains if held for at least a decade, according to the state’s Commerce Department. But the Panthers site is roughly six blocks from one in Rock Hill.
Investment in the project could interest players who want to maximize their earnings and expand their portfolio while they still have NFL checks coming.
Much like Manhertz believes he can rent or sell his home to future Rock Hill residents long after his NFL career ends, players could invest in local opportunities created by the Panthers’ impact and see it pay dividends in the future.
“Most people don’t realize that these guys get paid just 17 weeks per year,” said Copeland. “So you have to budget it out and make it last another eight months after that...
“What (money) are you able to keep and then re-invest back into your portfolio that you can grow and hopefully generate income for you when you’re done? It’s just a black-and-white numbers calculation.”
The average career length of an NFL player is about 3.5 years, according to the NFLPA. But fiscally savvy Carolina Panthers players could live the rest of their lives off of about four years of NFL paychecks — if they make the right investment with that money at the right time.
The State writer Maayan Schechter contributed.