Bruins Win Tax Case Against IRS Over Deducting Cost Of Team Meals
The Bruins earned a victory last week over the IRS that will "likely resonate far beyond the rink," according to Laura Saunders of the WALL STREET JOURNAL. In Jacobs v. Commissioner, Bruins Owner Jeremy Jacobs "argued the team should be able to deduct 100% of the cost of certain meals they provided to players and staff." Under current law, "only 50% of the cost of many business meals is tax-deductible." The Bruins’ victory has "potentially opened up a new tax maneuver for many businesses." Now they "may be able to write off twice as much as they thought allowable for meals provided to large groups at business meetings far from company headquarters." Saunders notes the IRS "still has time to appeal the decision." The case was brought in the U.S. Tax Court by Jacobs and his wife, Margaret. At issue were "write-offs for business-meal expenses." The Bruins’ owners "deducted 100% of the cost of meals provided to players and staff at road games," which came to $255,754 in '09 and $284,446 in '10. The IRS "argued the law allowed only for a 50% deduction of these expenses, and it wanted an extra $85,000 in taxes." The judge cited five conditions met by the team when he ruled in its favor:
- The meals were served in a separate space that was treated as leased by the Bruins. (The team didn’t pay extra for the space, which was provided free because the team paid for lodging and food.)
- Bruins management contracted for and controlled the food that was provided.
- The room where meals were served was on or near the business premises of the Bruins -- based on other cases holding that hotels can be business premises.
- The meals were provided during the workday, or just before or after it.
- The meals weren’t taxable to the Bruins players and staff because they were provided for the convenience of Bruins’ management.
The decision is a "certain win for all types of professional sports teams that play away games." Tax experts said that the ruling "could have even broader applications." Saunders writes it "isn’t clear how the rules would apply to meetings at restaurants or at other types of corporate meetings," but there are a "host of possibilities" (WSJ.com, 7/7).