The Taxing Wait for Oscar Colás

Good things come to those who wait. The White Sox have been waiting for close to two years for Oscar Colás. They might have to wait another year before he arrives on U.S. Shores. Get Inside the Dugout and look at The Taxing Wait for Oscar Colás.

The player dubbed “The Cuban Ohtani” is expected to officially sign for $2.7 million this January 15th. This is the shifted date for the International Signing Period. The period historically ran from July 2nd to June 15th, but Corona virus pushed the 2020 period to January 2021. This created hurdles for some top players and has effectively consolidated two periods and limited the dollars available.

Nobody could have predicted the past two years. Little yet the impact it has had on the sporting world. Oscar Colas’ timing has been especially unlucky. The young outfielder and sometimes pitcher from Santiago de Cuba made his professional debut in Nipon Pro Baseball with the Softbank Hawks in 2019. This is a path that select Cuban players have been granted. This allows them to earn pro dollars while still returning home to Cuba either in the off season or to represent their National Series squad.

The Taxing Wait for Oscar Colas

Colas spent parts of three seasons in the Softbank minor league system before debuting with a bang with their big club. He hit a home run in his first professional at bat and garnered the gaze of Major League scouts. Oscar Colas decided he wouldn’t return to Japan or Cuba and instead would pursue a path to MLB. This decision meant sacrificing his potential earnings with Softbank. Speculated to be at least $150,000 U.S. no small sum for a Cuban. It obviously also means not being able to return to Cuba for at least 8 years.

That decision is tough enough in normal times. Declaring his intentions in early 2020 would normally mean establishing residency in a third country which typically takes a few months. Then awaiting designation as a Free Agent also taking some time. Turn around on all of this can take six months or more. This is without the rumoured wrangling in the background with Softbank refusing to relinquish his rights. Even if he was a true international free agent in July of 2020 most teams long had handshake deals with players and had exhausted their pool money.

2017 was the advent of this current system which caps the top spending teams at just under $7 million for the period. Many teams prefer to spread their bonuses around and often to players as young as 16 or 17. We have seen more mature Cuban players such as 22 year old Colas receive relatively large bonuses though with a group of teams being aggressive on this type of player. The Houston Astros and Chicago White Sox are the two teams most associate with the Cuban free agent market.

As mentioned the 2020 period was pushed back, this meant some key signees had to wait but also meant more players entered the market competing for fewer dollars. This is exemplified by The White Sox signing Cubans Yoelqui Céspedes and Norge Vera in January of 2021 and exhausting their spending pool. Colas was released by Softbank and granted free agent status but found a barren market for a player who might otherwise garner the largest bonus.

The rumours began to circulate that Colas had an agreement with the White Sox. Also he would potentially wait a full year before bonus pools reset. In a typical year Céspedes and Vera would have signed in July of 2020. Colas would only have had to wait until July of 2021. Adding to his bad luck more Cubans than ever before have become available to sign. This has put even more downward pressure on signing bonuses.

The shifting of the signing period also has tax implications. First brought to the fore by James Fox of . We saw Norge Vera spend all of 2021 in the Domincan Republic. This is the path Colas might take as well, but why?

The Taxing Wait for Oscar Colas

Signing bonuses given to players are taxable in the year received. It falls under U.S. tax code if they are employed in the United States that same year. A 16 year old signing for $1 million dollars in July means that if you stash him in a Dominican development camp until the next year his bonus when he arrives in the U.S. is from a foreign country in the previous tax year. International signings typically take many years before they arrive in the Majors. The hope with more mature Cubans is obviously that this happens quicker.

An organization would hope to get a 22 year old player into their higher minor leagues sooner than later. However for Colas signing for the believed $2.7 million in January of 2022 if employed in the States in 2022 makes the full amount taxable. This could leave him with a burden of $950,000 by some estimates. Under the old system waiting from July to January isn’t as bad. The player likely still reports to minor league spring training and receives a minors assignment in the next calendar year.

The White Sox are a young team but have ambitions of winning sooner than later. One position they have a need for is in Right Field. Oscar Colas will be given every opportunity to win this job, but likely not in 2022. That schedule may have been aggressive as it were, but it is going to be 3 years since Colas played regular baseball. He has stayed active with baseball activities but getting into regular competition even in the low minors would aid him greatly.

Might the White Sox try to persuade Colas to worry about the lost money down the road? The player did already wait a full year to sign. The White Sox have also illustrated their willingness to extend players such as Eloy Jimenez and Luis Robert well before most teams would. However, it is more likely he will spend the entirety of 2022 in the Domincan Republic.This means that despite the high hopes the Sox and their fans have it will likely be a Taxing Wait for Oscar Colás.

Phil Selig

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