NY Rangers played a “home” game in Toronto without losing their MSG tax break, because reasons

Last week I was talking to a source for a story (mostly) unrelated to sports stadiums when they asked me a question: How come the New York Rangers‘ August “home” playoff game in Toronto as part of the NHL’s bubble didn’t count as a violation of the team’s tax exemption for Madison Square Garden, the one that reads:

If one or both of said teams [the New York Knicks or Rangers] shall cease to play their home games in said property at any time, the tax exemption provided herein shall cease immediately and such property shall immediately be restored to the tax rolls and thereupon become subject to taxation and shall be taxed pro rata for the unexpired portion of the taxable year.

Sure, it was just a single game, before the Rangers were unceremoniously bounced from the playoffs by the Carolina Hurricanes. But still, that clause had been enough of a concern that Rangers owner James Dolan made sure that for outdoor games at Yankee Stadium and Citi Field in 2014 and 2018, the Rangers were designated as the road team. So should that one-game sojourn in Toronto have triggered the automatic return of the Garden to the tax rolls, after $555 million in skipped tax payments?

The answer at first appeared to be “no one knows,” but further research revealed that it was actually “everybody says they know, but nobody can agree on an explanation,” which is far more entertaining. As I reported for Gothamist on Sunday:

The explanation from New York state is that “cease to play their home games in said property at any time” doesn’t mean what you think it means. State tax department spokesperson James Gazzale tells Gothamist, “The law is clear that the exemption continues until either team ceases to play home games at MSG—meaning a permanent stoppage, not a temporary relocation due to a global pandemic.” Asked why the Rangers then chose to play Winter Classic games as the road team, Gazzale declined to comment further.

Madison Square Garden officials, meanwhile, had a different explanation for why the Toronto trip was okay: Ed Koch said it would be. Garden officials confirmed a brief note in this New York Post article from July that an “original agreement” between the city and MSG excluded relocations due to Acts of God from triggering the tax renewal clause, but did not provide further details.

The actual agency that would be in the position of deciding to return MSG to the tax rolls, meanwhile, is the city Finance Department, which didn’t get back to me on any of my questions.

As I wrote for Gothamist, this would be a pretty picayune basis on which to make a decision worth hundreds of millions of dollars — but then, that’s exactly how the Garden ended up with its tax break in the first place, when someone neglected to include an end date even though it was intended to expire after a decade. Thirty-eight years later, the tax break is still going strong, and many New York officials are calling for it to be repealed. Just not on a technicality — that wouldn’t be cricket.

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3 comments on “NY Rangers played a “home” game in Toronto without losing their MSG tax break, because reasons

  1. I like the new look Neil.

    This is an interesting one. Absolutely a technicality (I would put it on par with attempting to evict a tenant in a condo because they ‘ceased living at the property’ by taking a 2 week vacation in Hawai’i), but if the politicos are really keen on eliminating the endless tax break – as some say they are – it would be an interesting play.

    My best guess would be the MSG owners would win on ‘force majeure’ grounds – they didn’t have the option of playing at MSG during the pandemic due to either league or government rules, depending on your POV, so it was in every sense the same as Hartford not playing at the civic centre because the roof fell in…. something clearly beyond the control of ownership or team management.

    But courts can be funny things.

    Was the Garden actually closed by any public order during this period?

    1. I don’t think there was a specific order for the sports venues but the general stay at home orders and bans on large gatherings would have ruled out playing games there. As silly as the tax break may be, I can’t see how the city would have one in court if they tried to void it based on this.

      If they were going to end the tax break they should have done it when the occupancy permit was up for renewal. I remember something about them only wanting to renew it for 10 years right after the Garden spent $1 billion rebuilding it.

      1. Force majeure would apply to contract law, but I’m less certain it can override a piece of the tax code. (Though Roger Noll did mention this idea as well.) And none of the city or state officials I spoke to mentioned this as the reason it wasn’t being enforced, so your guess is as good as mine.

        As for the occupancy permit, it’s a bit complicated there as that’s controlled by the city and repealing the tax break would require state action. Not that they couldn’t have worked out some quid pro quo, but it would have taken some doing.

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