A divided Minnesota Supreme Court has found that NBA referee Ken Mauer, who has a home in Afton, didn’t follow the tax code rules when he failed to properly file state income taxes in 2003 and 2004.
The 5-1 ruling in the yearslong dispute offers insight into the heavy-traveled life of a professional basketball official from one of the state’s most prominent athletic families, but Associate Justice G. Barry Anderson said in his dissenting opinion that the case also could muddle tax issues for people who divide their time living in Minnesota and in other states.
The key issue in the case was determining what percentage of time Mauer had lived in a Florida townhouse, and how long he lived in Afton in those tax years. Mauer argued he mostly lived in Florida, which is one of seven states that has no personal income tax, but the court ruled otherwise.
Graduating from University of Minnesota on a baseball scholarship, Mauer is in his 24th season as an NBA referee. His father and brothers were officials as well, and one brother, Mark, was football coach at Hill-Murray School. Twins catcher Joe Mauer is his cousin.
He initially filed no state income tax returns for 2003 and 2004, but after an inquiry by the state Revenue Department, filed a return as part-year resident in 2004. A subsequent audit determined he was a full-time Minnesota resident for both those years, setting the dispute in motion.
Mauer presented a series of arguments demonstrating his efforts to officially declare Florida his residence, the ruling shows.
The 10,600-square-foot home he built in Afton starting in 1990, insured for $2.1 million, was his sole residence until July 2003. Even while the home was being built, he was one of 22 NBA referees indicted in “Operation Slam Dunk,” a sting conducted by the IRS targeting basketball officials who had allegedly evaded taxes in an airline ticket-refund scheme. Mauer was found guilty on four charges, and part of his punishment included five months of home confinement in Afton. He missed the 2000-01 NBA season, but returned the following year.
The day after his confinement expired, on July 1, 2003, he immediately flew to Fort Myers, Fla. He bought a townhouse there two days later, got a Florida driver’s license and registered to vote there. He was back in Minnesota six days later, but signed a notarized “declaration of domicile” asserting Florida residency.
Mauer sought a homestead exemption on the Florida townhouse, and requested that Washington County officials remove the homestead status of his Afton home. His bank accounts were split between Florida and Minnesota. Mauer’s four vehicles, which include a 1989 Rolls-Royce Corniche, were registered and licensed in each state.
Also in 2003, Mauer asserted that he tried to sell the Afton home, setting the sale price at $3.1 million. But the court found there was no evidence that it was ever placed on the market, even a “for sale” sign. The home was never sold.
During the 2003-04 NBA season, the NBA also started raising questions about Mauer’s travel expenses. Mauer had designated Fort Myers as his home airport, but NBA officials said he was traveling out of the Twin Cities, and overstating his expenses. As the inquiry intensified, the NBA threatened to sanction Mauer, including possibly firing him. Mauer presented documentation claiming his use of Fort Myers as his base actually saved the league more than $1,600 on his $65,200 tab, and the matter was dropped.
Mauer argued that his willingness to put his career on the line in order to show Florida residency was dramatic proof supporting his argument. But the Minnesota Tax Court found, and the state Supreme Court agreed, that money, not residency, was the core of Mauer’s dispute with the NBA. It is undisputed, the ruling said, that Mauer was mostly traveling out of the Twin Cities. “This finding means that for Mauer to tell the NBA that he was traveling in and out of Florida was at best questionable and at worst a misrepresentation.”
In the end, the court concluded that Mauer had mostly lived in Minnesota, and owes state income taxes. Associate Justice Alan Page did not participate in the case, but Anderson, in his dissent, argued that Mauer had taken steps to establish Florida residency.
Anderson also said Mauer’s dispute with the NBA was convincing evidence of Mauer’s belief that he had changed residency.
More troubling, he said, is that a list of 26 factors used by the Revenue Department as criteria for residency — like those argued over in this case — “can only be described as arbitrary.”
Mauer’s attorney could not be reached to answer questions about the current status of his residency, but the 2012-13 NBA media guide lists his residence as Fort Myers.