linkdude said:

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Shohei Ohtani’s decision to earn just $2 million a year certainly is a great benefit to the Dodgers’ payroll, but also a stroke of genius for tax repercussions.
If he’s not living in California once his deferred payments start, he will not be subjected to heavy California tax.

— Bob Nightengale (@BNightengale) December 11, 2023

this is an interesting caveat on the deferral.

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A good point on the deferred comp…. It's a huge benefit for regular white collar workers if you want to move to a state like Texas (won't face any state income taxes on the deferred comp). But Ohtani will because the loophole doesn't apply.

So dumb it down for me..... this does what to LAD luxury tax #s

If I was Ohtani, deferred would be the move but I'd probably take the 40M aav and defer the final 300M

Mr.Bond said:

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So dumb it down for me..... this does what to LAD luxury tax #s

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It saves them hundreds of millions in luxury tax over the life of his contract.

Passan says his hit, even with penalties, is going to be about $46 million now.

There is a Passan tweet about deferrals being limitless under the CBA.

Makes you appreciate what the DBacks did this year even more.

For anyone wondering if MLB will challenge or cancel Ohtani's contract: The answer is unequivocally no. There is a specific article in the collective-bargaining agreement that addresses this. And it's very clear: Deferred money is limitless -- even $680 million of $700 million. pic.twitter.com/DGNK0JulED

— Jeff Passan (@JeffPassan) December 11, 2023

linkdude said:

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Shohei Ohtani’s decision to earn just $2 million a year certainly is a great benefit to the Dodgers’ payroll, but also a stroke of genius for tax repercussions.
If he’s not living in California once his deferred payments start, he will not be subjected to heavy California tax.

— Bob Nightengale (@BNightengale) December 11, 2023

this is an interesting caveat on the deferral.

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I'm not a tax professional but seems to me that this is highly unlikely to be true…..

His employer and the work performed was still based in California. The payment is just deferred. Otherwise, why wouldn't CEO's and other execs just do the same. Defer payment then retire and move to Texas.

I wonder what the cap will be in 10 years, and what the true payroll impact will be?

Stated differently, ca something be bull**** and brilliant at the same time?

This will still blow up in LA's face at some point, but winning a couple titles at a minimum will be worth it to them. They were desperate to not let Ohtani end up in San Fran and jump start another run for them.

Kyle Tucker.

$5mm/year, 10 years.

$350MM deferred, payable years 11-20.

Do it.

Those 10 years will be tough on the fan base. We would suck so bad

That seems to consider the actual payroll terms. I'm not sure it considers the CBT impact. Hopefully with the Bobby Bonilla buyout, MLB planned for things like this.

Bonilla doesn't appear to have an impact on the Mets CBT. It preceded it, so it likely was exempt.

A player should count against the 40 for the duration of the contract terms. It'd be funny if the CBT terms required Ohtani to count against the 40 for 20 years.

So does that mean that 2034-44 they will be subject to 68 mil/yr in roster salary that would apply towrds the luxory tax?

Texaggie7nine said:

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So does that mean that 2034-44 they will be subject to 68 mil/yr in roster salary that would apply towrds the luxory tax?

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No. They cooked the books. 2024-2033 they'll be subject to approximately 46 mil/year towards luxury tax calculation, and nothing in 2034-2043.

Cash flow will be 2 million per year for next 10 years and then 68 million per year for the following 10 years

I'm dense, but how does this get around AAV?

Deferred monies are discounted at a 5% rate and then applied to the term of the contract to calculate an AAV.

No one predicted that someone would do it for 97% of a $700M contract. And no one else will ever do it again to this scale because they don't have the Ohtani endorsement fallback.

Borrowing from the future, maybe in 2040 that money won't be so much after ridiculous inflation year over year.

Frok said:

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Borrowing from the future, maybe in 2040 that money won't be so much after ridiculous inflation year over year.

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Yeah 20 years ago ARod signed for 10 years 250M. Which at the time was the record for any US sports contract

That wouldn't even be in the top 30 AAV in the MLB today (Bogaerts is 30th with 25.4MM)

Buck Compton said:

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Deferred monies are discounted at a 5% rate and then applied to the term of the contract to calculate an AAV.

No one predicted that someone would do it for 97% of a $700M contract. And no one else will ever do it again to this scale because they don't have the Ohtani endorsement fallback.

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Thanks, my biggest question has been wouldn't the deferred monies effect the luxury tax when paid and hadn't seen it answered before this.

Also, while I agree that nobody will do it to this scale, you can argue that other's have potential to still do similar contracts even if they don't have the endorsement fallback.....Take Verlander for example, he doesn't have the endorsements Ohtani has, but still probably has a couple mil in endorsements? Also, he has a career earnings of $300mm+ and a wife that makes a few mil a year. So the opportunity to do something similar during his free agency could definitely have been there.

htxag09 said:

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Buck Compton said:

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Deferred monies are discounted at a 5% rate and then applied to the term of the contract to calculate an AAV.

No one predicted that someone would do it for 97% of a $700M contract. And no one else will ever do it again to this scale because they don't have the Ohtani endorsement fallback.

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Thanks, my biggest question has been wouldn't the deferred monies effect the luxury tax when paid and hadn't seen it answered before this.

Also, while I agree that nobody will do it to this scale, you can argue that other's have potential to still do similar contracts even if they don't have the endorsement fallback.....Take Verlander for example, he doesn't have the endorsements Ohtani has, but still probably has a couple mil in endorsements? Also, he has a career earnings of $300mm+ and a wife that makes a few mil a year. So the opportunity to do something similar during his free agency could definitely have been there.

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I get what you're saying but what incentive does JV have to do that? Ohtani is built different. JV and 99% of guys want their money. There is nothing stopping these billionaires from adding more guys.

Oh, I agree. Just stating that while nobody has the endorsements Ohtani has, they do have the means to do this if they wanted.

Now, wanting to do is a whole different animal.