Three ex-Blue Jays stars are in a legal battle with the Canada Revenue Agency over contributions to their pension plans while they played in Toronto, according to a report.
Josh Donaldson, Russell Martin and Jose Bautista are at odds with the CRA over how much income they deducted on their tax returns based on contributions to Retirement Compensation Agreements, according to the National Post.
It’s common for pro athletes playing in Canada for a limited time to set up RCAs as a means of deferring and mitigating tax payments — and allow for the person to cash out in the event of losing their job or retirement.
The trio, part of the Blue Jays’ memorable postseason runs in 2015 and 2016, face varying hurdles in their respective cases.
The CRA reportedly disallowed $16 million in deductions from Bautista’s income through contributions the seven-time All-Star made from 2014-17 — claiming his RCA is “not a ‘pension plan’ or ‘retirement compensation arrangement’” that adheres to the country’s Income Tax Act.
However, Bautista’s attorneys have argued his contributions should be considered as part of a pension plan as they were made to “assist with his transition into retirement.”
Bautista was a perennial MVP candidate in Toronto in 10 seasons from 2008-17, slugging 288 home runs.
He ended his career with three stops in the NL East in 2018, including 83 games with the Mets.
As for Donaldson and Martin, their issues hinge on where they claimed residence while they made contributions to their RCAs.
The CRA is reportedly arguing their deductions — as residents of Florida — should be calculated based on them splitting their time 60 percent of their time in the US and 40 percent in Canada for the season.
According to the National Post, the CRA is arguing for the deductions to be calculated prior to determining the players’ time split between the US and Canada.
The players have argued that the deductions should be calculated afterward.
Depending on the outcome, Donaldson’s income could be increased or decreased by $2.58 million while Martin’s could be adjusted by nearly $5 million.
Donaldson, now a third baseman with the Yankees, played in Toronto from 2015-18, winning the American League MVP in 2015.
Martin, a former Yankees catcher from 2011-12, spent four seasons in Toronto from 2015-18.
Tax attorney Marie-France Dompierre, who is representing the former Donaldson and Martin, has expressed concern this case could serve as a possible future deterrent for athletes to consider signing with a team in Canada.
“Canada’s high-income tax rates can deter professional athletes from joining teams based in Canada,” she said in a 2022 post for Tax Notes International.
“The ability to defer tax is often at the forefront of these discussions because this may permit Canadian teams to attract talent by reducing income tax rates to a level similar to those enjoyed by members of US-based teams.”
Donaldson and Martin’s case is set to be heard in court in July, while Bautista appealed his case in 2022 and it remains ongoing.