John Tavares took the stand in Tax Court on Tuesday and later told reporters he has no regrets about his 2018 decision to join the Maple Leafs, even as the CRA seeks $8 million in taxes on the signing bonus that helped bring him home.
John Tavares spent the better part of Tuesday, on the witness stand in Tax Court of Canada, walking Justice J. Scott Bodie through the precise sequence of meetings, emotions and contract structure that brought him from the New York Islanders to the Maple Leafs eight years earlier. Afterward, the Leafs centre and his lawyer Justin Kutyan spoke briefly with reporters about the core issue at the heart of the dispute: how a US$15.25-million signing bonus should be treated for tax purposes.
The Canada Revenue Agency, represented by Devon Peavoy, says the payment is employment income and that Tavares owes roughly $8 million, $6.8 million in tax plus $1.2 million in interest, at full Canadian rates. Tavares’s camp maintains the bonus was an inducement to sign under the Canada-U.S. tax treaty and was properly taxed at the 15 per cent rate already paid while he was still a U.S. resident.
Kutyan framed the case clearly for the media.
“This is about the signing bonus and it’s not about taxes already paid, it’s actually about who gets the tax. It’s either Canada or U.S., and obviously the minister thinks it’s Canada’s right to tax it, so we’re here to help guide the court in the right direction.” Kutyan said, adding that the fundamental disagreement is whether the signing bonus is “normal wages or is it something distinct and different. And that’s our sticking point.”
The implications, Kutyan said, reach beyond one player.
“There’s quite a bit of players that are involved in this type of issue and it’ll have… significant [implications] on attracting top talent in Canada. It’s a competing market, right? And certain markets don’t pay much tax, others do. So it’s whatever leverage you have as a team or an organization, and they’re going to definitely use that to their advantage.”
One of those players affected in a similar battle with the CRA, Patrick Marleau, is scheduled to take the stand on Wednesday as one of Tavares’ witnesses.
Inside the courtroom, Tavares recounted how agent Pat Brisson organized the 2018 interview week in Los Angeles at CAA’s offices, with two teams scheduled most days. He had not closed the door on the Islanders when the week began.
“The place means a lot to me, and it still does,” he testified. He referenced Steven Stamkos, who had tested free agency and ultimately stayed in Tampa.
“I owed it to myself to see what else was out there. I thought it likely I was going to stay as Steven did but things changed during the interview period.”
Day one brought meetings with the Islanders and Maple Leafs; his fiancée (now wife) and Brisson sat in, and specific dollars were off-limits. Subsequent sessions included meetings with the Boston Bruin s, Dallas Stars, San Jose Sharks and Tampa Bay Lightning, plus a phone conversation with the Vegas Golden Knights. San Jose arrived with owner Hasso Plattner and a large contingent. The Leafs group featured president Brendan Shanahan, GM Kyle Dubas and head coach Mike Babcock.
Dubas texted Tavares one minute into ‘talking period’ of free agency, a practice that no longer occurs in the NHL, and later sent a video on what it means to play in Toronto. San Jose followed with its own video.
Tavares met both the Leafs and Islanders a second time. The Toronto follow-up was limited to Dubas, Tavares and his fiancée and leaned more toward lifestyle than pure hockey. One club presented an actual offer and highlighted the benefit of a no-state-tax market. Tavares noted Toronto’s franchise value allowed it to pay heavily up front through front-loaded money and present-day value, an advantage not universal across the league.
By June 28 the choice had narrowed. On the 29th he told Brisson he was leaning Toronto and would sleep on it. He woke on the 30th still wrestling with leaving the Islanders. After more back-and-forth and a conversation arranged by a former teammate meant to keep him in New York, the opportunity in Toronto proved decisive.
“It just made too much sense, an unbelievable opportunity that was too good to pass up.”
Contract negotiations with Dubas proved more intense than expected. The sticking point was annual average value. After consulting a trusted friend, Tavares set a hard line at $11 million. Late that evening he called Dubas directly. Agreement on the AAV followed. Sign-and-trade talks aimed at an eighth year through the Islanders never materialized.
On July 1, 2018 he reviewed the Standard Player Contract with Brisson and Jim Nicei; his fiancée signed as a witness. An addendum addressed his number 91. The heavy signing-bonus component and front-loaded structure were intentional, designed to deliver present-day value and protect the total against lockouts or buyouts. Tavares said he was not specifically worried about a buyout at the time but believed in protecting the contract as fully as possible.
Under cross-examination he confirmed the Islanders had indicated money and structure were no object and that Toronto had initially sought an AAV below $11 million. He also addressed reports of a seven-year, $91-million framework from San Jose, stating he never received a formal offer at that total, despite it being in his response to the CRA’s reassement.
After court, Tavares was asked about the burden of captaincy and any precedent the case might set for how teams induce players.
“I think it’s a really special honor to be a captain, and it’s an amazing responsibility,” Tavares said. “Obviously now passing the captaincy on to Auston, and still being in a leadership role. There’s certain things that are in your control and out of your control and this part of the business side affects teams and how teams operate and their ability to acquire player. Being in here in Toronto, you want to continue to highlight what makes it special here to come play.”
On what is at stake for him and the league, Tavares said he was simply there “to prove what the contract was all about and the intentions.”
“You just hope everything can work out in my favor, in the good of all players, the league, teams and whatnot.”
Asked whether a loss that cost him millions in tax would leave him regretting the 2018 decision, he was unequivocal.
“No. The finance wasn’t the only reason for signing. I knew I was in an amazing position, I’m in a very lucrative contract, I wasn’t counting every last penny, but obviously I wanted to maximize my opportunity along with where I was gonna live, gave the best career possible and as successful as you can be,” he said. “ So I don’t think you ever live with any regrets. You just try to make the best decisions you can in that moment and follow your values, your ethics, your heart… Regardless of whatever the ruling is, I don’t have any regrets.”
Has the drawn-out process been stressful?
“I would like to be at my cottage today preparing for the season and spending time with my family,’ Tavares said while cracking a smile. “ But it is what it is. You deal with whatever comes your way. Justin and his team has been phenomenal. So just continue to go about my business daily and handle whatever comes my way when necessary.”
The trial is expected to continue for roughly two weeks. One of the CRA’s main arguments is aout how signing bonuses should be taxed. Neither side got into it. Justice Bodie was the only party to explicity ask about it, asking if it came up in conversation before signing with the Leafs.
“Yes, it did, Tavares said. ”I was in a position to command the type of signing bonus that I ended up getting and that type of front-loading payment. Because of the present day value of getting your money as soon as you can and how it helps protect you from lockout and potential contract buyouts
“We discussed those things and I had a pretty good understanding where I was in that marketplace and what I could command and the importance of getting that and in this position I could.”
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