Hockey team’s pregame meals fully deductible as de minimis fringe benefit

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The Tax Court has ruled that the owners of the Boston Bruins professional hockey team may deduct the entire cost of away game pregame meals as a de minimis fringe benefit.

During 2009 and 2010 the Boston Bruins played at hotels when visiting “away” cities and contracted with the hotels for the provision of pregame meals to players and team personnel. Jeremy Jacobs and his wife, Margaret Jacobs, own the Bruins through separate S corporations. The team contracted with the hotels they stayed at for the provision of pregame meals, and the Jacobs deducted the entire cost of the meals. The Tax Court held Monday in Jacobs v. IRS, 148 T.C. No. 24 that the provision of pregame meals qualifies as a de minimis fringe benefit under Code section 274(n)(2)(B), and therefore the cost of such meals is not subject to the 50 percent limitation of section 274(n)(1).

The expense would normally be subject to the 50 percent limitation unless it qualifies as a fringe benefit, observed Mike Chittenden, counsel at Miller & Chevalier, who wrote about the case on the law firm's blog. “This would typically apply to occasional group meals, such as an annual awards dinner,” he said. “The reasoning here as to why the meals satisfied the ‘convenience of the employer’ standard—that the team needed its members to be able to perform at peak physical levels—could apply to other employers as well. For example, a healthy meal could aid mental performance as well as physical performance, and could also reduce the amount an employer spends on its health plan.”

“Disallowance of the deduction would have the effect of making meals more expensive for the employer,” Chittenden said. “They would lose the tax deduction on half the value of the meals, but if the meals can qualify as a meal for the convenience of the employer, and can qualify as a de minimis fringe benefit, they will get the full deduction.”

The issue may not end with the Tax Court decision, however. “I expect the IRS will appeal,” Chittenden said. “Also, there has been a project on a priority guidance plan to issue new rules relating to employer-operated eating facilities, so this case may provide an impetus for the project to move forward.”

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