The United States Tax Court recently made a ruling that drew some fine lines about what constitutes a de minimis fringe benefit for employees. The IRS had sued the Boston Bruins Hockey Team, contending that meals served to players and others while attending away games was subject to the 50 percent limitation on the cost of meals provided to employees. It should be noted that this is a working-condition benefit and not taxable to the employees. The Bruins countered the IRS, stating that these meals met the qualifications of a de minimis benefit and were therefore fully deductible. The Tax Court sided with the Bruins, stating that the benefit was fully deductible.

Some background is in order. Obviously, half of the team’s games are on the road. The Bruins contract with the hotels in the cities where games are being played to provide pregame meals and snacks. These meals are prepared to meet specific nutritional guidelines for the players and may be customized for individual players. All traveling hockey employees receive the meals – players, coaches, trainers, equipment managers, communications personnel, public relations mangers, and other employees. Employees must be present in the meal room, as meal time provides an opportunity to conduct team business to discuss strategy and other matters.

There are several tests that must be met for the meals to be considered de minimis.

• The nondiscrimination test. The meals must be provided to all traveling employees. The Bruins produced testimony indicating that all traveling hockey employees were provided meals on substantially the same terms.
• The eating facility is owned or leased by the employer. The court found that the contract between the Bruins and the hotels could be construed as a lease of the banquet room facilities.
• The facility must be operated by the employer. The court found that contracting with another party to operate an eating facility is treated as operated by the employer.
• The facility must be located on or near the business premises of the employer. The court found that away city hotels were part of the business premises of the Bruins, as this is a necessary part of travel for the team.
• The meals must be furnished during, before, or after the employee’s workday. Since these were pregame meals, they qualified.
• The revenues derived from the facility must equal or exceed the operating costs of the facility. This test is satisfied if the meals are excludable income to the employee. This is the case in this instance.

Obviously, the meals provided are a step up from a McDonald’s Big Mac and fries. They are certainly not inexpensive. The IRS has ruled that items with a value exceeding $100 cannot be considered de minimis. If the value of each meal provided to an individual employee is under $100, the meals can qualify as de minimis. Since the other tests were met, according to the Tax Court, the Bruins may continue to deduct the full cost of these meals.

On the one hand, the average person would likely not consider these meals to be so small as to make accounting for them unreasonable (IRS definition of de minimis). They would be a feast for many of us. But to view it from a business standpoint, this is a necessary expense of operating a professional hockey team. It goes beyond simply the necessity of feeding employees who are traveling. It provides nutrition for maximum performance in the games, it gives an opportunity for team and individual meetings. The Tax Court drew a fine line here, but I think they got it right.