BOSTON (CBS) — When the Boston Bruins travel for away games, they spend a lot on pregame meals. They have been deducting them as business expenses for several years, but the IRS doesn’t agree. Now, owner Jeremy Jacobs is taking them to U.S. Tax Court.
Filed on July 27, Jacobs v. Commissioner argues that the team should be allowed to deduct 100% of meal expenses for business purposes. The IRS argues that the team’s meals fall under the “entertainment, amusement or recreation” category, which would not be deductible. The team’s filing came after the IRS audited them for $85,028 in unpaid taxes from 2009-10.
Before you have another Ray Bourque nightmare, hear the Bruins out. They actually have a compelling case.
At the risk of giving you a headache, here’s how the tax code breaks down: If a meal counts as a business expense, the Bruins can deduct up to 50% of the total cost. Meals are 100% deductible if they are made by an “employer-operated eating facility.” And a facility qualifies as “employer-operated” if it makes meals “on their business premises” and provide them “for the convenience of the employer.”
Essentially, the Bruins claim that the hotels they stay at are their “business premises” because they use them for meetings, film sessions, workouts, physical therapy, etc. And pregame meals are provided for their “convenience” because they allow the team to “control the players’ movement and conduct up until the game.”
The original report by Bloomberg called the team’s case “interesting”, but tax attorney Philip Garrett Panitz told the Boston Globe that it’s stronger than that: “A business retreat where all employees are required to dine together would be very similar…The Bruins need to show that this is an ordinary and necessary business expense. I think they have a good argument.”
The Bruins argue that the NHL “simply would not function” without teams traveling for away games and using hotels for business.
“In short, the pregame mandatory meals and the meetings at away city hotels allow the club and the players to prepare for the upcoming game — both physically and mentally,” the filing reads. “In this regard, the pregame meals and the meetings serve as a necessary component of the Bruins’ hockey operations.”
The case has huge implications for not just the Bruins, but the NHL and traveling sports franchises at large. NHL deputy commissioner Bill Daly announced in a statement that the league is supporting the team in the case, saying they are “coordinating the litigation for the potential benefit of all of its member clubs.”
The outcome of the case could set a major precedent for sports organizations moving forward.