Tax Court Rules that Bruins’ Pregame Meals are Fully Tax Deductible
posted Jul 17, 2017 by Harold Shapiro, CPA in the Global Tax Blog
The Boston Bruins hockey team can load up on fully tax-deductible pregame meals thanks to a recent tax court ruling! Pregame meals for players and personnel at away games now qualify as de minimis fringe benefits and are, therefore, not subject to the 50% limitation under code section 274(n). The case was brought to Court by Jeremy and Margaret Jacobs who own the Bruins through an S corporation.
More about Code section 274(n)
Code section 274(n) imposes a 50% limitation on the deduction for meal expenses unless an exception applies. One of these exceptions is that the 50% limitation does not apply if the benefit qualifies as a de minimis fringe benefit.
Qualifying as a de minimis fringe benefit
In order to meet this test, the code requires that access to the eating facility is available to each member of a group of employees, and no favors are given to highly compensated employees.
There are a number of tests to determine whether the meals are provided in a nondiscriminatory manner. Employee meals constitute a de minimis fringe benefit under code section 132(e) if:
- The eating facility is owned or leased by the employer;
- The facility is operated by the employer;
- The facility is located on or near the business premises of the employer;
- The meals furnished at the facility are provided during, or immediately before or after, the employee’s workday; and
- The annual revenue derived from the facility normally equals or exceeds the operating costs of the facility.
Recent case with the Bruins
The NHL requires its teams to play half of their yearly games away from home and has detailed rules governing travel to those games, including a requirement that the teams must arrive the night before when traveling to a game’s location that would be a plane trip longer than 150 minutes. Unlike home game ticket sales, away game ticket sales are not the NHL team’s to keep and the players incur various penalties if they miss an away game.
In order to accommodate this schedule, the Bruins contract with hotels for lodging and food in away game locations. The hotels provide set up, pregame meals and snacks in banquet rooms and halls, and the food is made available to all traveling hockey employees.
Why the Bruins owners argued players’ meals should be fully deductible.....
- For every breakfast and lunch, travelling hockey employees were required to be present in the meal room.
- The meals did indeed provide the Bruins with a chance to conduct team business. Bruins players met with team coaches to discuss strategy and review game film. The public relations staff also attended breakfast where they met with players concerning anticipated media inquiries or interviews.
The court’s decision
Taking the above information into account, the Court determined that the Bruins met the de minimis fringe benefit tests and were not subject to the 50% limitation on the deduction for their away game meals.
The Bruins case is just one example but there may be other ways in which companies that require employees to stay at the same hotel and eat together for business can avoid the 50% meal limitation if they can meet the requirements for the de minimis fringe benefit.
Here’s an example. A group of employees from ABC Company are assigned to a project away from home. The company contracts with the hotel for the ABC employees assigned to the job to stay at the hotel and eat their meals together in the hotel restaurant or a separate room while business is discussed. By working with the hotel prior to the employee’s arrival, ABC Company may be able to meet the requirements for the de minimis fringe benefit and get fully deductible meals.
If your company requires employees to travel as a group and meet the conditions outlined above, you may be able to get fully deductible meals.
Have questions on fringe benefits or the 50% meal limitation? Reach out to our Tax Services Team.