A team of professional hockey players can run up a pretty big meal tab — so big, in fact, that Boston Bruins owner Jeremy Jacobs is fighting the Internal Revenue Service in US Tax Court for the right to deduct the full cost of feeding Zdeno Chara, Tuukka Rask, and their teammates during road trips.
The case may involve burly athletes and what court documents describe as the “large portions” they consume at team meals on the road, but it could have broader implications for businesses that send workers off-site and foot the bill for food and beverages.
“A business retreat where all employees are required to dine together would be very similar,” said Philip Garrett Panitz, a tax attorney at Panitz & Kossoff, a law firm in Westlake Village, Calif. “The Bruins need to show that this is an ordinary and necessary business expense. I think they have a good argument.”
Jacobs’s legal action, first reported by Bloomberg BNA, is a response to a notice the team received in April in which the IRS claimed the Bruins owe a total of $85,028 in taxes from 2009 and 2010. In an appeal filed in July, the Bruins said the missing payments were the result of their practice dating back to 2007 of taking 100 percent tax deductions for team meals during road trips.
The IRS limits deductions for meal expenses to 50 percent in most cases.
The Bruins contend the 50 percent cap — contained in a section of the tax code for “entertainment, amusement, or recreation” — should not apply because fueling world-class athletes for competition is a fundamental part of their 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 petition by the Bruins owner said. “In this regard, the pregame meals and the meetings serve as a necessary component of the Bruins’ hockey operations.”
Sean M. Akins, an attorney for the Bruins, declined to comment on the case. He added that he “can’t speak to” whether the Bruins have continued the practice of taking a 100 percent deduction for meals in the years since 2010. A Bruins spokesman also declined to comment.
Professional sports clubs and athletes routinely deduct other expenses that may seem recreational to most people but are business basics to them — everything from hockey pucks to therapeutic massages.
The National Hockey League said it is assisting the Bruins in their legal battle, believing the case could set a precedent.
“The league supports the position that the club is taking in the case and is therefore coordinating the litigation for the potential benefit of all of its member clubs,” Bill Daly, NHL deputy commissioner, said in a statement. “This is often done in individual club cases where the outcome may or will have an effect on a large number of similarly situated clubs or the league as a whole.”
Several other clubs, including the Chicago Blackhawks, Detroit Red Wings, and New York Rangers, did not respond to Boston Globe inquiries about their tax deduction practices.
Locally, at least one pro sports team needn’t worry about the issue. Red Sox players have to pay for their clubhouse meals, according to spokesman Kevin Gregg. Red Sox principal owner John Henry also owns the Globe.
The Celtics declined to comment on their practice. The Patriots did not respond.
‘Everyone needs food to survive, but these meals are for more than mere survival . . . That would be an interesting argument.’Jennifer A. Ray, partner, tax group, Washington law firm Crowell & Moring
Last year the IRS included employer-provided meals on a list of top tax priorities for 2014 and 2015, and auditors have reportedly been cracking down on the free food served up by some companies. The Wall Street Journal reported last fall that the IRS has sought back taxes from workers at technology giants like Google Inc., Facebook Inc., and Twitter Inc. — famous for their generous office perks — on the principle that a complimentary lunch is a taxable fringe benefit.
In the Bruins’ case, the IRS demanded payment from the team, rather than individual players. Tax specialists said the success of the club’s appeal could hinge on whether the Bruins can persuade the court that their “business premises” are not confined to TD Garden but rather extend to whichever city the next game will be played in. The tax code offers a specific exemption to deduction limits for food and beverages “furnished on the business premises of the taxpayer primarily for his employees.”
“For each away game, the Bruins travel to the away city and set up a base of operations at a local hotel,” the team wrote in its petition. “The away city hotel is the club’s business premises during the club’s travels in the away city.”
For a day, at least, the hotel replaces the Garden as the Bruins’ home. Players and staff watch film, receive medical treatment, and eat there before morning practices and again before evening games. The meals double as strategy sessions, according to court documents, and “are critical to each Bruins player’s job and to the club’s ultimate purpose of playing, and winning, professional hockey games.”
“Prior to its arrival at the hotel, the team sends a tightly designed menu to the hotel catering service,” the team added. “For example, the meals are heavy on carbohydrates and come in large portions, and the team dictates exactly what proteins, fruits, and vegetables must be available.”
Jennifer A. Ray, a partner in the tax group of the Washington law firm Crowell & Moring, said the Bruins could claim that team meals “are not really meals in the traditional sense.”
“Everyone needs food to survive, but these meals are for more than mere survival,” Ray said. “They’re fuel for performance. That would be an interesting argument. I haven’t seen that.”Callum Borchers can be reached at firstname.lastname@example.org. Follow him on Twitter @callumborchers.