You'd think that hockey players already have enough money problems, what with
their lack of income last year and the 25% salary cut for the 2005-2006 NHL
season, which begins next week. But some must also deal with the wrath of the
Consider, for example, the 1999 tax case of former hockey legends Lou ("Sweet
Lou from the Soo") Nanne and Stan ("Stosh") Mikita, who found themselves facing
off in court over a tax issue -- one that ultimately caused the Canada Revenue
Agency to change its entire assessing policy in this area.
The story began in 1997, when Nanne and Mikita were subject to Canadian
withholding tax on pension benefits they received that year from the National
Hockey League Pension Society, which is located in Montreal.
Nanne played with the Minnesota North Stars from 1968 to 1978, and Mikita
played with the Chicago Black Hawks from 1958 to 1980. During each of these
entire periods, both men lived in the United States and thus were considered
During those years, both the North Stars and the Black Hawks contributed, on
behalf of each of the players, to the NHL's pension plan, which ultimately
resulted in a pension surplus in the plan.
A dispute arose as to who owned the surplus -- the NHL or the players. The
matter was ultimately settled in an Ontario court in 1992, when the court ruled
that the players were entitled to the pension surplus.
As a result of this finding, in 1997 Nanne and Mikita were each entitled to
receive pension benefits that were subject to Canadian non-resident withholding
tax. While Canada does not generally tax U.S. residents, the Income Tax Act
states that Canada does have the right to tax most income from Canada earned by
non-residents, including pension income.
There is, however, an exception to this rule for pension payments that "may
reasonably be regarded as attributable to services rendered by the person ... in
taxation years during which the person at no time was resident in Canada, and
throughout which the person was not employed, or was only occasionally employed,
The CRA argued that since Nanne and Mikita travelled regularly to Canada to
play hockey in various Canadian cities, their services were attributable to
employment in Canada and thus subject to the 15% non-resident withholding tax.
Luckily for Nanne and Mikita, however, the Tax Court judge disagreed. After a
detailed review of the NHL travel schedules during the relevant seasons, the
judge concluded that in his 10 years in the NHL, Nanne was employed an average
of 6.6 days of time in Canada per year while in Mikita's 22 years, he was
employed in Canada an average of 12 days of time per year.
The judge ruled that the pension amounts were not subject Canadian
withholding tax and, as the judge put it, "those numbers of days in a year,
which merely occurred from time to time, represent occasional employment."
So Nanne and Mikita did not have to share their pension benefits with the
taxman. Moreover, the case caused the CRA to change its policy going forward. In
2003, the CRA "accept[ed] the methodology used by the court in determining
whether an individual is 'only occasionally employed' in Canada.... The decision
of the court in the Nanne case will be applied on a case-by-case basis."
Players 1, CRA 0.
Colour Photo: Ward Perrin, Canwest News Service; Hockey legends Stan Mikita and
Lou Nanne won a fight with the Canada Revenue Agency over the payment of
non-resident withholding tax on some NHL pension surplus funds.;
Colour Photo: Elsa, Getty Images; (Lou Nanne).