IRS Slapshot Misses
Ernie Neve, CPA
July 5, 2017
Those of you reading this who know me likely know I have been a hockey player all my life. My real hockey stopped after college, but I continue to live out my dreams in Beer League! And of course nothing is better than teaching my 11 year old twin boys to love the game.
Summer is here, so naturally, everyone's thinking about hockey. Well, I am anyway. The hated Pittsburgh Penguins have just taken their second Stanley Cup in a row, and the rest of the NHL is working to make sure there's no three-peat. But one of those teams just won a different sort of contest, in Tax Court of all places. It's a rare occasion when I can combine hockey with my other passion (taxes, of course!) So let's go to the tape . . .
Jeremy Jacobs is the owner and chairman of Delaware North, a concession company operating at places like stadiums, racetracks, and national parks. (Sounds like he's as much to blame as anyone for the $14 beers you bought at your last ballgame.) He also owns the Boston Bruins, which finished 2017 with a 44-31-7 record in the league's Eastern Conference. Forbes magazine pegs his net worth at just $4.4 billion, which means he's barely a billionaire and still has to watch his pennies.
The Bruins play half their games on the road. Those road trips can get expensive, especially when it comes to feeding everyone: "between 20 and 24 players, the head coach, assistant coaches, medical personnel, athletic trainers, equipment managers, communications personnel, travel logistics managers, public relations/media personnel, and other employees." The team actually requires everyone to attend breakfast, where players meet with coaches to talk strategy, review film, discuss media inquiries, and make roster changes.
The Bruins spent $255,274 on team meals in 2009 and $284,446 in 2010. Now, we all know those are deductible: you can write off 50% of the cost of meals you eat while traveling for business. But Jacobs wasn't satisfied deducting just 50%. He (or at least his accountants) wanted to deduct 100% of those expenses as de minimis fringe benefits.
Here's the problem. For employee meals to qualify as a de minimis fringe benefit, they have to be served at a facility "owned or leased by the employer." But the team served half of those meals on the road. So the IRS iced half of those expenses, and the parties wound up facing off in court.
Judge Ruwe sounds like a hockey fan. His opinion runs a full 34 pages, which is the Tax Court equivalent of overtime for a case that size. The main issue was whether the hotel meeting rooms where the team served meals qualified as their "business premises" under code section 132(e)(2). And the referee judge, exercising some much-appreciated common sense, ruled for the team.
In short, he said, league rules require the team to play half of its games away from home, and even arrive at least six hours before game time. Wherever the team hosts those meetings is its "place of business," sat least for that contest, so the meals the team serves are 100% deductible de minimis fringe benefits. The decision saved Jacobs $45,205 for 2009 and $39,823 in 2010.
NHL Hall of Famer Wayne Gretzky once said: "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be." We agree with Gretzky, and we don't settle for playing where the puck is. So call us when you're ready to suit up against the tax code, and let's put some Ws on the board!