Manny Pacquiao's $20M Victory Over Bradley Is Big Win For IRS Too

Apr 13 2014, 3:32pm CDT | by

Manny Pacquiao's $20M Victory Over Bradley Is Big Win For IRS Too
Photo Credit: Forbes Business

Manny Pacquiao’s Dominating Win Over Timothy Bradley earned him $20 million. That brings his career earnings above $300 million. But some of the money is clearly going to pay taxes in his long brewing two-country tax flap. And given that this fight was in Las Vegas, the IRS has the upper hand.

Notably, Mr. Pacquiao is neither a U.S. resident nor a citizen. All of us on tax day know painfully well that Americans pay taxes on their worldwide income. But as a nonresident alien, Pacquiao doesn’t pay U.S. taxes on monies he earns elsewhere. Of course, Mr. Pacquiao’s big paydays and 14 fights were in the U.S.

Then, in early 2013, his adviser Michael Koncz sparked controversy by stating that Mr. Pacquiao would likely avoid fighting in the U.S. in the future. After all, our 39.6% rate is hard to swallow. All else being equal, fighting outside the U.S. in lower tax rate countries made sense. Yet return he did, and his $20 million guarantee for facing Timothy Bradley was a big win, in cash and otherwise.

Foreign athletes must file U.S. income tax returns and face special withholding rules so they don’t just pocket the money and run. They generally must pay U.S. income tax on their U.S.-source income. Earnings in Vegas? Clearly, that’s all taxed by the IRS.

But in other matters, what is considered U.S.-source can be debated. It includes pay for performances, endorsements, merchandise sales, and royalty or other income closely related to the event. And big money can turn on exactly how the “Hollywood Accounting” is done.

The IRS has a special program targeting foreign athletes and entertainers. Depending on an athlete’s home country, treaty benefits may apply. Yet disputes are common about how much income to allocate to particular countries and where endorsement earnings should be taxed. The U.S. Tax Court has often heard athlete tax disputes over promotional income, intellectual property and more.

Mr. Pacquiao’s taxes are controversial with the IRS and with the counterpart Philippines Bureau of Internal Revenue. The versatile boxer is also a lawmaker in the Philippines, yet tax authorities there long clamored for his U.S. tax records. Exactly what does he pay where, and how does he divvy it all up?

For a time, his promoter, Top Rank Inc., evidently submitted correspondence to the Philippines tax man showing that he did pay U.S. taxes via withholding. But the official IRS documents to confirm it were long debated. Some reports say that in all, he owes as much as $50 million. 

Pacquiao’s advisor, Mr. Michael Koncz, says Pacquiao’s financial situation in the Philippines may be more politics than anything. Mr. Koncz has said that tax deductions are at the center of the tax disputes. Mr. Pacquiao is famously charitable.

Pacquiao’s tax attorneys are said to be working on the case, and Mr. Koncz says it’s going well. But the IRS is famously sticky, and U.S. charitable contribution rules are rigid. Mr. Koncz has expressed concern over Mr. Pacquiao’s generosity with fellow Filipinos.

There are past liabilities for Philippine taxes and past liabilities to the IRS, once those are finally ironed out in court or otherwise. Clearly too, Mr. Pacquiao will owe current taxes to the IRS on his recent earnings. But the feisty boxer is already looking ahead. He noted after his Bradley fight that he thinks he can fight for two more years.

Perhaps he will face Juan Manuel Marquez or Mike Alvarado, who are scheduled to face off May 17th.  The IRS will be watching.

You can reach me at This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

NASA mission to study magnetic fields in universe
Washington, Nov 25 (IANS) The US space agency plans to launch an ambitious Magnetospheric Multiscale (MMS) mission in March next year to deploy four identical spacecraft from a single rocket to study magnetic reconnection in the universe.
Ebola crisis may result in more hunger: UNDP report
United Nations, Nov 25 (IANS) Wild price swings caused by the Ebola health crisis are making it more difficult for households to feed themselves and make a stable living, according to a new UN report released Monday.
WHO reports plague outbreak in Madagascar
United Nations, Nov 25 (IANS) Outbreak of plague in Madagascar has killed 40 people, a UN spokesman said here Monday.
Russia to control annual oil production to help stabilise oil market
Moscow, Nov 25 (IANS) Russia attempts to stabilise global oil market by not exceeding its annual production of 525 million tons, Energy Minister Alexander Novak said Monday.

Latest from the Network

Gwen Stefani wants to 'disappear' from her children
Gwen Stefani is tempted to escape her everyday stresses by going to a motel. The 45-year-old beauty - a mother of three children - says that although she loves her kids, she dreams about disappearing from them at times...
Read more on Celebrity Balla
Ed Sheeran dances his way to weight loss
Los Angeles, Nov 25 (IANS) Singer Ed Sheeran has lost weight and he credits dance classes for transforming his looks. The 23-year-old is flaunting a lean figure after spending weeks training with professional dancer...
Read more on Celebrity Balla
P. Diddy 'regrets not pursuing relationship with Cameron Diaz'
P. Diddy regrets not pursuing a romantic relationship with Cameron Diaz. The music mogul and the actress were said to have dated between 2008 and 2012, and it's been claimed Diddy, 45, wishes he took their union further...
Read more on Celebrity Balla
Kendra Wilkinson says Hugh Hefner offered her an escape
Kendra Wilkinson entered the Playboy Mansion because it offered her an escape route. The blonde beauty is currently appearing in 'I'm a Celebrity ... Get Me Out of Here!' and has been reflecting on her relationship with...
Read more on Celebrity Balla
Halle Berry accuses ex of racism
Gabriel Aubry made ''completely and totally unacceptable'' racial slurs against Halle Berry, a court has been told. The 48-year-old actress, who dated the French-Canadian model between 2005 and 2010, has taken her...
Read more on Celebrity Balla
Chris Hemsworth loves teasing his wife
Los Angeles, Nov 25 (IANS) Actor Chris Hemsworth says he loves to tease his wife Elsa Pataky by pretending that he cannot understand her, when he gets distracted. The 31-year-old, who was named People magazine's...
Read more on Celebrity Balla
What makes Nicki Minaj shy?
Los Angeles, Nov 25 (IANS) Nicki Minaj has flaunted sensual outfits with confidence several times, but she says she has felt "shy" about them sometimes. The 31-year-old, who recently donned an all-black ensemble at...
Read more on Celebrity Balla
Ebola crisis may result in more hunger: UNDP report
United Nations, Nov 25 (IANS) Wild price swings caused by the Ebola health crisis are making it more difficult for households to feed themselves and make a stable living, according to a new UN report released Monday....
Read more on Business Balla
US court sentences Mexican drug trafficker to 22 years
Chicago, Nov 25 (ians/EFE) a Mexican man was sentenced Monday to 22 years in federal prison for smuggling cocaine to Chicago. "I tell you on behalf of all citizens of Chicago... we are tired of this drug trafficking...
Read more on Politics Balla
Justin Bieber named highest-earning entertainer under 30
Justin Bieber is the highest-earning entertainer under the age of 30, according to Forbes. The controversial musician earned as much as $80 million during the 12-month period between June 2013 and June 2014, in part...
Read more on Celebrity Balla