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Wednesday, July 18, 2012

Everybody knows that everybody likes sports. According to the Sports Business Journal, employers are parleying their ties to sports teams, leagues and events into employee benefits. Internal marketing of a company’s sports sponsorship can boost morale, provide perquisites, enhance recruiting and publicize corporate philanthropy

For example, according to the Sports Business Journal, Discover Financial Services, an official sponsor of the National Hockey League, was able to display the Stanley Cup in its suburban Chicago headquarters for a half-day after the Blackhawks won the Stanley Cup in 2010. Workers were welcome to pay a visit to have a look and even have their pictures taken with the trophy. This year, the Cup was displayed in Discover’s New Castle, Del. office as a reward for winning an internal call center contest.

Other examples include pre-game hospitality sessions, free or discounted game tickets and discounted team merchandise, either as special rewards for exemplary performance or for general availability to employees.

OMG! Can you inadvertently create a taxable fringe benefit under the Internal Revenue Code or an employee welfare benefit plan subject to ERISA’s reporting and disclosure requirements by providing these sports perks to employees? On the tax question, occasional parties and occasional tickets to sporting events are generally treated as non-taxable de minimis fringe benefits under section 132 of the Code. On the ERISA question, there is no direct guidance in the governing regulations; however holiday gifts such as turkeys or hams are not included in the definition and it appears that the smaller and more occasional the employee reward, the less likely that the Department of Labor will assert that it constitutes an employee benefit plan subject to ERISA. Likewise, the sky is not the limit. If the perks are given too often or the value is too high (think season tickets or Oprah’s iPad giveaway), they will not qualify as de minimis fringe benefits, they will be subject to income and payroll taxes, they may constitute an ERISA employee benefits plan, and they may make the company look silly to employees.

Please share your thoughts and experience on this subject.

Disclaimer/IRS Circular 230 Notice

 

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