Boston Professional Hockey Association, Inc. and Jeremy M. & Margaret J. Jacobs v. Commissioner of Revenue (June 30, 2003)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BOSTON PROFESSIONAL HOCKEY   v.   COMMISSIONER OF REVENUE
ASSOCIATION, INC.  	  		    	

Docket Nos. F250820-23

JEREMY M. AND MARGARET J.    v.   COMMISSIONER OF REVENUE
JACOBS  	  		    	

Docket Nos. F250978-81			Promulgated:
							June 30, 2003

These are appeals under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39 from the refusal of the appellee to abate corporate excises assessed against the appellant, Boston Professional Hockey Association, Inc., under G.L. c. 63, § 38 for tax years 1991 through 1994, and to abate personal income taxes assessed against the appellants, Jeremy M. and Margaret J. Jacobs, under G.L. c. 62, § 4 for tax years 1991 through 1994. 
Commissioner Scharaffa heard the appeals and was joined in the decisions for the appellee by Chairman Burns and Commissioners Egan and Rose.
These findings of fact and report are made at the requests of the appellants and the appellee pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.   
John Kenneth Felter, Esq., Alan Dankner, Esq., and Daniel M. Forman, Esq. for the appellants.

Thomas W. Hammond, Esq. and John Delosa, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
On the basis of an Agreed Statement of Facts and testimony and exhibits introduced at the hearing of these appeals, the Appellate Tax Board ("Board") made the following findings of fact.  The Boston Professional Hockey Association, Inc. ("BPHA") is a Massachusetts Domestic     S corporation with a principal place of business in Boston, Massachusetts.  During calendar years 1991 through 1994, inclusive ("the tax years at issue"), Jeremy Jacobs was the sole shareholder of the BPHA, which owned and operated the Boston Bruins Professional Hockey Club ("Bruins") of the National Hockey League ("NHL").  Jeremy and Margaret Jacobs (the "Jacobs") were residents of the State of New York during the tax years at issue.  BPHA timely filed, pursuant to valid extensions, Massachusetts Domestic S Corporation Excise Returns, Form 355S-A, for the tax years at issue.  The Jacobs timely filed, pursuant to valid extensions, Massachusetts Nonresident Income Tax Returns, Form 1-NR, for the tax years at issue.  
By a Notice of Intention to Assess ("NIA") dated July 24, 1995, the Commissioner of Revenue ("Commissioner") informed BPHA of his intent to assess additional corporate excises against it for the 1991 and 1992 tax years in the amounts of $143,989.00 plus $64,158.32 interest and $100,019.00 plus $24,387.22 interest, respectively.  By NIA dated August 19, 1995, the Commissioner informed the Jacobs of his intent to assess additional personal income taxes against them for the 1991 and 1992 tax years in the amounts of $235,278.00 plus $102,497.05 interest and $171,707.00 plus $41,936.81 interest, respectively.  
By NIA dated November 8, 1997, the Commissioner informed BPHA of his intent to assess additional corporate excises against it for the 1993 and 1994 tax years in the amounts of $76,960.00 plus $33,931.45 interest and $56,850.00 plus $17,894.64 interest, respectively.  By NIA dated November 17, 1997, the Commissioner informed the Jacobs of his intent to assess additional personal income taxes against them for the 1993 and 1994 tax years in the amounts of $120,717.00 plus $58,446.00 interest and $87,872.00 plus $26,918.05 interest, respectively.  
By a Notice of Assessment ("NOA") dated March 10, 1998, the Commissioner notified BPHA of the assessment of corporate excises against it for the 1991 and 1992 tax years in the amounts of $143,989.00 plus $126,027.00 interest and $100,019.00 plus $61,365.00 interest, respectively.  By NOA dated March 10, 1998, the Commissioner notified the Jacobs of the assessment of personal income taxes against them for the 1991 and 1992 tax years in the amounts of $235,278.00 plus $199,699.00 interest and $171,707.00 plus $103,473.00 interest, respectively.  
By NOA dated March 23, 1998, the Commissioner notified BPHA of the assessment of corporate excises against it for the 1993 and 1994 tax years in the amounts of $76,960.00 plus $38,039.00 interest and $56,850.00 plus $20,633.00 interest, respectively.  By NOA dated March 23, 1998, the Commissioner notified the Jacobs of the assessment of personal income taxes against them for the 1993 and 1994 tax years in the amounts of $120,717.00 plus $58,446.00 interest and $87,872.00 plus $30,877.00 interest, respectively.
On April 2, 1998, BPHA paid the total assessed amounts for the tax years at issue.  On that same day, the Jacobs paid the total assessed amounts for the tax years at issue.  On July 8, 1998, BPHA timely filed applications for abatement with the appellee for each tax year at issue requesting abatement of all amounts assessed including interest.  Also on July 8, 1998, the Jacobs timely filed applications for abatement with the appellee for each tax year at issue requesting abatement of all amounts assessed including interest.  By notice dated August 18, 1998, the Commissioner informed BHPA of his refusal to abate the tax assessed for the tax years at issue.  By notice dated October 9, 1998, the Commissioner informed the Jacobs of his refusal to abate the tax assessed for the tax years at issue.  On October 15, 1998, BPHA timely filed petitions under formal procedure with the Board appealing the Commissioner's decision.  On December 7, 1998, the Jacobs timely filed petitions under formal procedure with the Board appealing the Commissioner's decision.  Based on these facts, the Board found it had jurisdiction over these appeals.  
BPHA operates a unitary business, which includes the ownership and operation of the Bruins, the sale of tickets to Bruins hockey games, the licensing of local broadcast rights, the licensing of national and international broadcast rights, the licensing of logos and trademarks, and its ownership of a partnership interest in New England Sports Network, Limited Partnership ("NESN"), a Massachusetts limited partnership with a principal place of business in Boston and its commercial domicile in Massachusetts.  BPHA's business was conducted in accordance with its NHL membership, as governed by the NHL Constitution, NHL By-laws, and NHL Resolutions.  BPHA's gate receipts from Bruins games accounted for about two-thirds of its total income as reported on its audited financial statements. 
BPHA employed coaches, players, trainers, scouts and other employees in the conduct of its business.  During the tax years at issue, BPHA had forty-five players under contract including twenty-five on the NHL roster and twenty players on the Bruins' minor league affiliate.  All forty-five players were subject to a standard NHL player contract.  During the tax years at issue, BPHA hired approximately twelve or thirteen scouts who were each assigned to a specific territory.  Most of these scouts were assigned to territories outside of Massachusetts.  All scouts were paid from BPHA's Boston office.   
Richard McGlinchey, the controller for BPHA, testified, and the Board found, that BPHA hired twenty people at its office on Causeway Street in Boston.  He stated that these office employees worked throughout the year at this location and they performed various tasks including media relations, payroll, accounts payable, financial statements and secretarial support for the President, General Manager, and Vice President of Sales and Finance.  All travel arrangements and equipment purchases for Bruins players were made in Boston by BPHA employees.  Moreover, Harry Sinden, the General Manager for the Bruins, maintained his office at BPHA's Causeway Street location.  As General Manager, Mr. Sinden negotiated all player contracts and contracts with the broadcasters WEEI and WSBK-TV.  Mr. Sinden also negotiated contracts for insurance and was involved with registering trademarks for BPHA and for approving the final design for Bruins logos and trademarks.  
Mr. McGlinchey testified and the Board found that BPHA did not pay a separate rent for the Causeway Street office space or for ice time for the Bruins' practices at the Boston Garden during the tax years at issue.  However, BPHA did pay rent for the use of the Boston Garden to play its regular season games.  BPHA leased the Boston Garden from New Boston Garden Corporation. 
The parties are disputing the correct apportionment of BPHA's income to Massachusetts for the tax years at issue.  As Mr. Jacobs is the sole shareholder of BPHA, a Massachusetts S corporation, the Jacobs are disputing the amount of income tax that should be attributed to Massachusetts for these same tax years.  The appellants advanced several theories that they claimed would reduce the Massachusetts income of BPHA and therefore, the Jacobs.  These theories pertained to the several items of income earned by BPHA in the operation of its unitary business.  These items of income are described in detail below. 

BPHA's sale of tickets to Bruins hockey games.
The NHL Constitution and By-laws controlled each hockey franchise's schedule of games and receipt of revenues.  Pursuant to BPHA's NHL membership, the Bruins players, coaches, and trainers were required to play approximately one half of the regular season games in jurisdictions outside of Massachusetts, including other states and Canadian provinces.  The NHL Constitution and By-laws provided that BPHA retained one hundred percent of the revenues received from home games and were not entitled to any of the opponents' revenues from visiting games.  The Bruins also played regular season games at designated neutral game sites.  The revenue from each neutral site game was split among the two teams and the NHL.  
The Bruins played preseason and postseason games in addition to their regular season games during the tax years at issue.  The Bruins entered into two different types of arrangements for playing preseason games.  Under the "paired" arrangement,  pursuant to which the Bruins played a paired game against an opponent, BPHA retained its home game receipts and the opponent retained its home game receipts.  Financial arrangements for "unpaired" games varied and involved either a fixed appearance fee for the visiting team or some other mutually agreed upon amount of compensation.  During playoff season, the Bruins were required to play an equal number of games inside and outside Massachusetts for the first four games of the series, and to play alternating home and away games thereafter.  BPHA retained all receipts from the first two home games and no receipts from the two away games.  If the series extended beyond four games, each team contributed a specified amount into a pool which was divided sixty percent to the winning team and forty percent to the opponent.  In 1991, the Bruins also played a special exhibition game in Boston against Team USA.  
BPHA also derived revenue from season ticket holders who purchased season tickets pursuant to a Season Ticket Subscription Agreement ("Season Ticket Agreement") and to the terms and conditions printed on the reverse side of the tickets.  BPHA derived revenue from season ticket holder sales regardless of whether the season ticket holders attended the games, provided that the games were played.  During the 1994-1995 season, BPHA refunded to its season ticket holders the prices of games that were cancelled due to a player strike.  BPHA received payment for season ticket sales prior to the start of the season, but it recorded the sales as deferred game revenues and recognized the sales as earned after the regular season was played.  The number of season ticket holders during each of the seasons in the tax years at issue was approximately 12,000.  
BPHA incurred direct and indirect costs in the conduct of its business.  At the hearing, Christopher Barry, a partner at PricewaterhouseCoopers LLP who was called as an expert witness for the appellants, testified to the expenses BPHA incurred for the Bruins to play its preseason, regular season, and playoff season games.  Mr. Barry defined a "direct cost" as "any cost that is identified specifically with a particular cost objective."  He defined BPHA's "cost objective" as "the individual playing of a hockey game."  He then categorized certain expenses as direct costs (Boston Garden rental expense, players' salaries, coaches' salaries, trainers' salaries, payroll taxes and pension expenses associated with those salaries, team travel expenses, equipment expenses, training camp expenses, playoff expenses, and insurance expenses) and the others as non-direct costs.  Accordingly, Mr. Barry excluded certain expenses from his analysis of direct costs, including scouts' salaries, trainers' expenses, scouts' expenses, player development, publicity, medical expenses, season ticket expenses, and other expenses.  
Mr. Barry then stated that consistent with Generally Accepted Accounting Principles ("GAAP"), one hundred percent of BPHA's direct costs of playing each away game was incurred in the jurisdiction in which the game was played.  Mr. Barry also testified that, in accordance with GAAP, "each game, whether home or away, represents a discrete event for which ticket revenues should be recognized."  He admitted that, excluding playoff games, the Bruins retained gate receipts only from their regular season home games (and a few limited away games).  However, 


Mr. Barry testified that BPHA earned consideration for the Bruins regular season away games in the form of "the obligation of the away team . . . to play a commensurate or matching game essentially back at the Bruins Garden at some either later point in time or perhaps the corresponding game had been played already."  Accordingly, Mr. Barry stated that each individual game, both home and away, was a separate income-producing activity for BPHA.   
However, the Board found that with respect to the game revenues it received, BPHA's income-producing activity was the ownership and operation of an NHL franchise, the Bruins.  This income-producing activity included many subsidiary activities which were necessary to create a viable NHL franchise.  While the individual games played by the Bruins were integral activities, other activities necessary to BPHA's business included those performed by the administrative and office staff on Causeway Street, including scheduling, contract negotiation, and the approval of logos and trademarks.  The Board thus found that Mr. Barry's direct cost analysis was flawed and incomplete.  The Board also found that the appellants did not prove that more income-producing activities occurred in any one state other than Massachusetts during any of the tax years at issue.
BPHA's licensing of local broadcast rights.
The NHL Constitution and the By-laws, which defined certain territorial rights for broadcasting games, provided that each team owned the exclusive rights to broadcast games in its home territory ("local broadcast rights").  During the tax years at issue, BPHA granted a local broadcast license to radio programming of Bruins games to Boston Celtics Acquisitions Limited Partnership ("BCALP"), a Delaware limited partnership with a place of business in Boston, Massachusetts and its commercial domicile in Massachusetts.  BCALP was the owner and operator of WEEI-AM ("WEEI").  WEEI broadcast all Bruins preseason, regular season, and playoff season games during the tax years at issue, including the special exhibition game against Team USA that was played in Boston in 1991.  Pursuant to a written agreement, WEEI paid license fees to BPHA during the tax years at issue for the rights to broadcast Bruins games on the radio.  
BPHA also granted local broadcast rights to televise Bruins games.  New Boston Television, Inc. ("WSBK-TV"), a Massachusetts corporation with its commercial domicile in Massachusetts, contracted for the rights to televise certain Bruins games.  Pursuant to a written agreement, WSBK-TV paid license fees to BPHA during the tax years at issue for the rights to televise Bruins games.  The majority of games broadcast by WSBK-TV during the tax years at issue were played outside of Massachusetts.    
BPHA also granted local television rights to NESN, a Massachusetts corporation with its commercial domicile in Massachusetts.  NESN's studio was located in Boston, Massachusetts.  Pursuant to a written agreement, NESN paid license fees to BPHA during the tax years at issue for the rights to televise Bruins games.  The majority of games broadcast by NESN during the tax years at issue were played within Massachusetts.  Nancy Rose, the production manager for NESN, testified, and the Board found, that she scheduled the activities of the employees who covered the broadcast of both home and away games and the transmission of events on NESN from her offices in Boston.  NESN also paid license fees to BPHA for the right to televise the Bruins games.  
Mr. Barry testified that the radio and television stations incurred many costs to broadcast Bruins games.  He testified that for each away game it broadcast, each of the stations incurred direct expenses, including salary and travel expenses to send announcers, producers, engineers, and other personnel to the site of the game, and expenses for the transmission of the broadcast signal from the site of the game to the Massachusetts studio.  Mr. Barry calculated that the following percentages of direct costs associated with broadcasting away games was actually incurred at the sites of the away games:  80% for WEEI; 78% for WSBK-TV; 97% for NESN.   However, Mr. Barry did not include some of the broadcasters' costs in his direct cost analysis, including broadcast fees paid to BPHA.  Mr. Barry acknowledged that these three stations could not have broadcast the Bruins games without payment of the broadcast license fees.  Moreover, Mr. Barry did not indicate that the costs of broadcasting games incurred in any one state exceeded the costs incurred in Massachusetts.  
The Board found that the income-producing activity of each of the broadcasters - WEEI, WSBK-TV, and NESN - was the production and airing of its programming.  The Board thus found that each broadcaster's income-producing activity included many activities vital to producing the individual Bruins games, including the various tasks like scheduling and production that were performed at each broadcaster's Massachusetts studio and the contractual negotiations which created each broadcaster's right to broadcast the games.  The Board found that these costs were incurred in Massachusetts, the location of the broadcasters' studios.  The Board also found that the rights fees paid by WEEI, WSBK-TV, and NESN to BPHA exceeded the total costs listed by Mr. Barry for each of these stations.  Finally, the Board found that the income-producing activity of BPHA with respect to its broadcasting fees was the licensing of its broadcast rights to the broadcasters.  Mr. Barry's direct-costs analysis ignored the many costs incurred by BPHA in developing and maintaining a marketable franchise, including among other expenses the salaries paid to players, trainers, and coaches, and the costs of marketing and advertising the team.  The Board thus found that Mr. Barry's direct cost analysis was flawed and incomplete.  The Board also found that the appellants did not prove that more income-producing activities occurred in any one state other than Massachusetts during any of the tax years at issue.


BPHA's licensing of national and international broadcast rights.

Under the NHL Constitution and By-Laws, each team owned the exclusive rights to the broadcast of games that were played in its home territory.  In 1984, all of the then-existing NHL teams entered into the Member Club Agreement of November 30, 1984, as amended on December 5, 1984 and December 20, 1984 (the "TWX Agreement"), in which each team granted to the NHL all of that team's non-local broadcast rights to any games played in its territory.  The parties referred to these rights as national and international broadcast rights.  The TWX Agreement authorized the NHL to sublicense the national and international broadcast rights to national and international broadcasters in the United States and Canada.  The TWX Agreement was amended by the Modified Member Club Agreement of March 7, 1988 (the "MMCA Agreement").  According to the TWX Agreement, as amended by the MMCA Agreement, the NHL was a licensee of BPHA at all relevant times with respect to the national and international broadcast rights.  
At all relevant times, the NHL was an unincorporated, not-for-profit association.  It maintained offices in New York, Montreal, and Toronto.  It did not maintain an office in, or direct or manage its business affairs from, Massachusetts and did not have its commercial domicile in Massachusetts.  During the tax years at issue, the NHL sublicensed its rights to various broadcasters - SportsChannel America, ESPN/ESPN2, NBC, ABC, Fox and Molson - who conducted national and international broadcasts of NHL hockey games, including certain Bruins games.  None of the NHL's broadcast sublicensees had its commercial domicile in Massachusetts.   
 Mr. Barry's direct cost analysis attributed direct costs associated with the licensing of the national and international broadcast rights to the jurisdictions in which the licensees used the rights.  Mr. Barry claimed that the broadcasters used the rights in their own commercial domiciles.  However, the Board found that the appellants failed to consider the many costs incurred by BPHA in developing and maintaining a marketable franchise.  The Board thus found that Mr. Barry's direct cost analysis was flawed and incomplete.  The Board also found that the appellants did not prove that more income-producing activities occurred in any one state other than Massachusetts during any of the tax years at issue.

BPHA's licensing of the Bruins logos and trademarks.

BPHA received license revenues from licensing its logos and trademarks to the NHL and NHL-related entities.  BPHA has treated these amounts as Massachusetts receipts for purposes of computing its sales factor.  From January 1, 1991 through June 30, 1991, NHL Services, Inc., a New York corporation ("U.S. Enterprises") and NHLS of Canada, Ltd., an Ontario corporation ("Canadian Enterprises") were licensed by BPHA to use certain of BPHA's logos and trademarks.  U.S. Enterprises maintained offices in New York and Canadian Enterprises maintained offices in Quebec.  BPHA's licenses to both U.S. Enterprises and Canadian Enterprises were terminated effective July 1, 1991.  Beginning at that time, BPHA granted similar licenses to the NHL.  None of the licensees had its commercial domicile in Massachusetts.  
Mr. Barry testified that none of BPHA's receipts from the licensing of its logos and trademarks was attributable to Massachusetts because the receipts were attributable to the jurisdictions in which the licensees had their commercial domiciles.  However, the Board found that his analysis failed to consider the many costs incurred by BPHA in developing and maintaining a marketable franchise, including among other expenses the salaries paid to players, trainers, and coaches, and the costs of marketing and advertising the team.  Moreover, the analysis omitted the salary paid to BPHA's executives, namely Mr. Sinden, who retained important responsibilities for approving the Bruins logos.  The Board thus found that Mr. Barry's direct-cost analysis was flawed and incomplete.  The Board also found that the analysis did not prove that more income-producing activities occurred in any one state other than Massachusetts during any of the tax years at issue.
 
BPHA's ownership of thirty-one percent limited partnership interest in NESN.

At all relevant times, NESN was a Massachusetts corporation in the business of developing sports television programming for sale to the cable television industry.  NESN's office was located in Boston, where it housed forty-five employees engaged in engineering, sales, advertising, promotion, marketing, accounting, and administrative functions.  The approval of contracts for programming and sales was performed by NESN's Vice-President and General Sales Manager, respectively, whose offices were located in that Boston facility.  NESN's studio was also located in Boston.  NESN produced its programming, including the insertion of advertisements, from its studio in Boston. 
NESN did not cablecast its programming directly to subscribers but instead entered into agreements with affiliated cable television operators ("affiliates") whereby NESN licensed to these affiliates the right to cablecast its programming in return for a fee paid by the affiliate.  Some of the affiliates were headquartered in Massachusetts, including Continental Cablevision, and others were headquartered outside of Massachusetts, including Time-Warner.  NESN used a satellite dish located in Needham, Massachusetts to "up-link" its programming to a satellite.  The affiliates received the satellite signal and cablecast the programming to its individual subscribers who paid a fee for the right to receive the cablecast.      
NESN derived its revenue primarily from affiliate revenues and advertising revenues.  The appellants presented evidence, and the Board so found, that the regional advertising revenues accounted for a percentage of the total advertising revenues in the following percentages:  35.5% in 1991; 30.2% in 1992; 34.5% in 1993; and 42.0% in 1994. The Board also found that the proportion of Massachusetts subscribers was 72.1% in 1991, 71.1% in 1992, 70% in 1993 and 68% in 1994.  
The appellants argued that the Commissioner should not have taxed BPHA on its full pro rata share of NESN's receipts, because the receipts should have been attributed to the commercial domicile of each of NESN's licensees, including affiliates, advertisers, and individual subscribers.  However, the appellants failed to consider the many costs incurred by BPHA in developing and maintaining a marketable NHL franchise.  The Board thus found that the appellants' direct cost analysis was flawed and incomplete.  The Board also found that the appellants did not prove that more income-producing activities occurred in any one state other than Massachusetts during any of the tax years at issue.

NESN's use of portions of satellites owned by GE.

During the tax years at issue, NESN used a portion of a satellite owned by GE American Communications, Inc. ("GE"), a Delaware corporation.  NESN used a portion of the satellite referred to as "Satcom IR" during the initial portion of the tax years at issue, and it used a portion of the satellite referred to as "Satcom C-3" during a portion of the tax years at issue after Satcom IR was taken out of service.  GE was the owner of Satcom IR and Satcom C-3 during all relevant times.  Satcom C-3 orbited approximately 22,300 miles above the Earth's surface and 1200 miles west of Mexico's Baja California coast.  Satcom IR was located in approximately the same position when it was in use.  
NESN and GE entered into a C-3 Preemptible Satellite Transponder Service Agreement, dated July 31, 1991 (the "C-3 Satellite Agreement"), whereby GE provided NESN with "preemptible satellite transponder service" on Satcom C-3.  GE charged NESN a monthly fee for NESN's right to transmit its signal to Satcom C-3 and then rebroadcast the signal back to earth where the NESN affiliates picked up the signal for distribution to individual subscribers.  An agreement similar to the C-3 Satellite Agreement between NESN and GE governed NESN's use of Satcom IR (the "IR Satellite Agreement").  
The Board found that NESN's right to transmit its signal to Satcom IR and Satcom C-3 was not an ownership or a rental of tangible property.  The Board found instead that the C-3 Satellite Agreement and the IR Satellite Agreement were agreements for the provision of services, specifically the transmission of a signal by NESN to the satellites and then back to NESN's affiliates, by GE to NESN.  Accordingly, the Board found that the appellants failed to prove that the Commissioner erroneously calculated the property factor of BPHA's corporate excise.  
 Based on all the above facts, the Board ruled that the appellants were not entitled to abatements of corporate excises or personal income taxes based on the Commissioner's calculation of BPHA's sales factor or property factor.  Accordingly, the Board issued decisions for the appellee in these appeals.

OPINION
Domestic and foreign corporations which do business in the Commonwealth are required to pay an excise based in part on their net income derived from business activities carried on in Massachusetts.  G.L. c. 63, §§ 32, 38, and 39.  The net income of a corporation for Massachusetts tax purposes is generally equal to gross income as defined under the Internal Revenue Code (the "Code") as amended and in effect for the taxable year (G.L. c. 63, § 30(3)) minus the deductions allowable under the Code with exceptions not relevant to these appeals.  G.L. c. 63, § 30(4).
If a corporation has income from business activity taxable both in Massachusetts and elsewhere, its taxable net income is apportioned to Massachusetts by means of a three-factor formula based on the ratio of its property, payroll, and sales in Massachusetts to its total property, payroll, and sales everywhere.  G.L. c. 63, § 38(c)-(f).  The appellants here challenge the Commissioner's calculation of the property and sales factors in the calculation of BPHA's corporate excise.  They do not challenge the Commissioner's calculation of their payroll factor.

Calculation of BPHA's Sales factor.
The first issue on appeal was whether the Commissioner properly taxed BPHA on its "Massachusetts sales" for purposes of the sales factor computed under G.L. c. 63, § 38(f).  Section 38(f) provides in relevant part that receipts from sales other than sales of tangible personal property are considered to be Massachusetts sales if:
the income-producing activity is performed in this Commonwealth; or

the income-producing activity is performed both in and outside this commonwealth and a greater proportion of this income-producing activity is performed in this commonwealth than in any other state, based on costs of performance.

G.L. c. 63, § 38(f) (emphasis added). 
The appellants contested the Commissioner's inclusion of one hundred percent of BPHA's sales revenue as Massachusetts sales revenue with respect to the following activities: (1) BPHA's sale of tickets to Bruins hockey games; (2) BPHA's licensing of local broadcast rights to WEEI, WSBK-TV, and NESN; (3) BPHA's licensing of national and international broadcast rights to the NHL and the NHL's subsequent sublicense to various broadcasters; (4) BPHA's licensing of the Bruins logos and trademarks; and (5) BPHA's ownership of a limited partnership interest in NESN.  The Board found and ruled that the Commissioner properly apportioned the receipts from these activities to Massachusetts.


BPHA's sale of tickets to Bruins hockey games.
The appellants contended that the Commissioner erroneously attributed one hundred percent of BPHA's gate receipts to Massachusetts because the Bruins performed less than half of its income-producing activities relative to these receipts in Massachusetts based on Mr. Barry's analysis of direct costs of performance.  To support this contention, the appellants cited 830 CMR 63.38.1(9), which defines an income-producing activity as:
a transaction, procedure, or operation directly engaged in by a taxpayer which results in a separately identifiable item of income.  In general, any activity whose performance creates an obligation of a particular customer to pay a specific consideration to the taxpayer is an income-producing activity.

Citing Mr. Barry's testimony, the appellants maintained that the income that BPHA received from Bruins regular season away games was consideration in the form of an obligation by the opposing team to play "a commensurate or matching game" at the Boston Garden, either before or after the away game.  Mr. Barry also testified that pursuant to GAAP, one hundred percent of what he called BPHA's "direct costs" were actually incurred in the jurisdiction where the game was played.
  	Based on costs of performance, Mr. Barry contended that BPHA's regular season gate receipts should be divided by the total number of regular season games to yield the revenue produced by each individual game.  Because the Bruins played at least half of their regular season games in jurisdictions outside of Massachusetts, the appellants contended that less than one hundred percent of the gate receipts should have been attributed to Massachusetts based on the costs of performance associated with the away games.  G.L. c. 63, § 38(f). The appellants cited 830 CMR 63.38.1(9) as support for its contention that the consideration supposedly given in each away game transformed each away game into a separate income-producing activity.  Accordingly, the appellants argued that the revenue associated with each away game (an amount of gate receipts proportional to the number of away games) should not be sourced to the Commonwealth. 
 However, 830 CMR 63.38.1(9) refutes the appellants' contention.  First, the only consideration the appellants cited was the obligation by the opposing team to play a corresponding home game at the Boston Garden.  However, the Board found that this obligation was not "paid" to BPHA; rather, it was an obligation governed by the NHL Constitution, By-Laws and Resolutions between the individual team and the NHL.  Furthermore, the regulation specifically requires "an obligation of a particular customer to pay a specific consideration to the taxpayer" as evidence of the existence of an income-producing activity.  The Board found and ruled that the consideration of an opposing team to play a correlating game did not transform each away game into a separate income-producing activity, where BPHA never received nor was taxed on income from that activity in the first place.  See Interface  Group-Nevada, Inc. v. Commissioner of Revenue, 26 Mass. App. Tax Bd. Rep. 1, 14-15 (finding that activities were income-producing activities in accordance with G.L. c. 63, § 39(f) if their "performance created an obligation in the ultimate customers to pay consideration").    
Moreover, the Board found and ruled that BPHA's income-producing activity was not merely an individual Bruins game but instead the overall ownership and operation of an NHL franchise.  Therefore, BPHA's income-producing activity included many subsidiary activities like scheduling, contract negotiation, and the approval of logos and trademarks.  The Board found and ruled that these subsidiary activities, most of them performed by the administrative and office staff on Causeway Street, were necessary in creating a viable NHL franchise.  Accordingly, the Board found and ruled that many of the costs excluded by Mr. Barry, like salaries to BPHA's executive and administrative staff working at the Causeway Street office and the correlating payroll and pension tax expenditures on these salaries, should have been included in the analysis of the costs associated with BPHA's business, because the totality of activities by Bruins players, coaches, scouts, and executive and administrative staff "were necessary steps in creating the ultimate [NHL franchise] product, and thus constituted activities whose performance created an obligation in the ultimate customers to pay consideration."  Interface, 26 Mass. App. Tax Bd. Rep. at 15 (finding that the salaries paid to employees who booked and marketed accommodations from the Needham office should have been included as costs of performance in apportioning a travel agency's income to Massachusetts).
Furthermore, the appellants did not provide an analysis indicating that BPHA's direct costs in any one specific jurisdiction exceeded its direct costs in Massachusetts.   Therefore, the  Board found and ruled that
the appellants failed to prove that a greater proportion of BPHA's income-producing activities associated with the playing of Bruins home games was performed in any single state other than Massachusetts.  See Interface, 26 Mass. App. Tax Bd. Rep. at 14-15 and Surel International, Inc. v. Commissioner of Revenue, 24 Mass. App. Tax Bd. Rep. 38, 43 (1998) ("The Board ruled that in determining whether gross receipts  are   to   be  regarded  as  Massachusetts sales,
G.L. c. 63, § 38(f), requires a comparison of costs between those incurred in Massachusetts and those incurred in other individual states and not, as the Appellant contends, between costs incurred in Massachusetts and those incurred in all other states combined.").  
Contrary to the appellants' argument, the Commissioner's attribution of one hundred percent of BPHA's home gate receipts to Massachusetts does not violate the commerce clause.  The Supreme Court has stated that a tax satisfies the commerce clause if it (1) "is applied to an activity with a substantial nexus with the taxing State"; (2) "is fairly apportioned"; (3) "does not discriminate against interstate commerce"; and (4) "is fairly related to the services provided by the State."  Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977).  The appellants challenge the Commissioner's interpretation and application of the statute and regulations as failing the "fairly apportioned" requirement, this requires the tax to be both "internally" and "externally consistent."  See Container Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159, 169-70, reh'g denied, 464 U.S. 909 (1983).  Internal consistency requires that "the [state's apportionment] formula must be such that, if applied to every jurisdiction, it would result in no more than all of the unitary business's income being taxed."  Id. at 169.  External consistency requires that "'the State has taxed only that portion of the revenues from the interstate activity which reasonably reflects the in-state component of the activity being taxed.'"  Aloha Freightways, Inc. v. Commissioner of Revenue, 428 Mass. 418, 422 (1998) (quoting Goldberg v. Sweet, 488 U.S. 252, 262 (1989)).  "[W]e will strike down the application of an apportionment formula if the taxpayer can prove by clear and cogent evidence that the income attributed to the State is in fact out of all appropriate proportions to the business transacted . . . in that State, or has led to a grossly distorted result."  Container Corp., 463 U.S. at 170 (quotations omitted).  However, it is also well-established that "the taxpayer has the 'distinct burden of showing by "clear and cogent evidence" that [the State tax] results in extraterritorial values being taxed.'"  Gillette Co. v. Commissioner of Revenue, 425 Mass. 670, 680 (1997) (quoting Container Corp., 463 U.S. at 164).  
In the instant appeals, BPHA was not taxed by any other jurisdiction for the revenues being taxed by Massachusetts.  Therefore, the appellants could not show that more than all of BPHA's business income was being taxed, thus failing to show a lack of internal consistency.  Moreover, the appellants failed to show a lack of external consistency.  BPHA was the owner of a Massachusetts franchise, which operated an office headquarters in Massachusetts, played about half of its games in Massachusetts, received gate receipts only for regular season games played in Massachusetts and not for regular season games played in any other jurisdiction, and did not have income-producing activities in any other jurisdiction that exceeded all of its income-producing activities in Massachusetts.  The taxpayer here was conducting a business within the borders of Massachusetts, and thus fell fairly within the taxing provisions of the corporate excise.  See generally, Truck Renting & Leasing Ass'n v. Commissioner of Revenue, 433 U.S. 733 (2001).  The Board thus found and ruled that the taxpayer failed to produce "clear and cogent evidence" of extraterritorial taxation when its income was subject to apportionment according to the Commonwealth's approved statutory formula.  See Gillette, 425 Mass. at 681 ("The three-factor formula adopted by the Legislature in G.L. c. 63, § 38(c), is widely recognized as a fair method of apportioning net income.") (citing Becton, Dickinson & Co. v. Department of Revenue, 383 Mass. 786, 790 (1981) and W.R. Grace & Co. v. Commissioner of Revenue, 378 Mass. 577, 587-88 (1979)).
The appellants had the burden of establishing the facts necessary to justify their claim for abatement.  William Rodman & Sons, Inc. v. State Tax Commission, 373 Mass. 606, 610 (1977).  The Board found and ruled that the appellants failed to prove that the Commissioner improperly included one hundred percent of BPHA's gate receipts attributable to Bruins regular season home games in BPHA's sales factor and, accordingly, the Board did not grant relief from this portion of the Commissioner's assessment.

BPHA's licensing of local broadcast rights.
The appellants argued that the Commissioner erroneously attributed to Massachusetts one hundred percent of BPHA's receipts from the licensing of its local broadcast rights.  The appellants contended that each broadcast of every individual game was a separate income-producing activity, and the broadcast revenues from each individual away game were attributable to the jurisdiction in which the game was played.  For this contention, the appellants cited 830 CMR 63.38.1(9)(d)3.c, which provides in pertinent part:
Where a taxpayer licenses intangible property to another party and receives royalties or similar payments for the use of the intangible property, income-producing activity includes the use of the intangible property by such other party.  Each use of the intangible property that results in a separately identifiable item of income for the taxpayer shall be a separate income-producing activity and shall be considered a separate use of the intangible property for purposes of 830 CMR 63.38.1(9)(d). . . . (emphasis added).


The appellants argued that, based on this regulation, the income-producing activities of the broadcasters were properly included in the direct-cost analysis of the income-producing activities associated with the licensing of BPHA's local broadcast rights.  Based on Mr. Barry's analysis, they argued, the majority of the broadcasters' direct costs of using their licenses was incurred in the jurisdiction in which the Bruins game was played.  Accordingly, the appellants contended that the Commissioner should not have assessed BPHA on the percentage of the licensing fees associated with the costs of performing the broadcast of Bruins away games, because the licenses were actually used where the game was played based on the costs of performance associated with the broadcast.
The Commissioner contended that this regulation did not apply to the appellants' incomes subject to apportionment because it was not effective until after the tax years at issue.  Nevertheless, the Board has previously addressed the application of a later-promulgated regulation to the facts of an appeal.  See Surel, 24 Mass. App. Tax Bd. Rep. at 43 ("Without deciding whether or not the regulation is applicable," the Board addressed the regulation and found that "even if the regulation were to apply to the Appellant, the Appellant would not prevail.").  Assuming arguendo the application of 830 CMR 63.38.1(9)(d)3.c, the income-producing activity of licensing BPHA's local broadcast rights "includes the use of the intangible property" by WEEI, WSBK-TV, and NESN. 
 	The appellants' argument nonetheless fails for two critical reasons.  First, the Board found and ruled that Mr. Barry's analysis failed to include all direct costs. The Board found that the income-producing activity of each of the broadcasters with respect to  the licensing fees was
the production and airing of the programming associated with the broadcast rights.  Income-producing activities thus included those activities vital to producing the individual Bruins games, including the various tasks performed at each broadcaster's Massachusetts studio.  Based on that finding, the  Board found and ruled  that the 
costs of performing the broadcasters' income-producing activities included many costs incurred in Massachusetts, including salaries paid to production staffs who worked in the broadcasters' Massachusetts studios.  See Interface 26 Mass. App. Tax Bd. Rep. at 14-15.  
The Board also found and ruled that an analysis of direct costs with respect to BPHA's licensing of broadcast rights must include the license fees paid by each broadcaster to BPHA for the right to broadcast the Bruins games.  As Mr. Barry admitted, the licensing of the local broadcast rights depended on the broadcasters' payments of these fees.  These fees were thus "expenses that can be directly identified with particular sales" similar to other costs that the Board has previously found to be direct costs, like "variable factory overhead."  Surel, 24 Mass. App. Tax Bd. Rep. at 43.
Moreover, the Board agreed with the Commissioner that an analysis of direct costs associated with BPHA's licensing activities must include BPHA's costs in developing and maintaining a marketable franchise, including among other expenses the salaries paid to players, trainers, and coaches, and the costs of marketing and advertising the team.  830 CMR 63.38.1(9)(d)3.c does not espouse that the licensees' activities are the only income-producing activities associated with the licensing of an intangible right, but rather, that an income-producing activity associated with licensing "includes the use of the intangible property by such other party." (emphasis added).  Therefore, BPHA's expenses in maintaining the Bruins, including salaries paid to all players, coaches, scouts, and executive and administrative staff, should have been included in a direct costs analysis because, without a viable franchise, BPHA would have had nothing to license to the broadcasters.  See General Mills v. Commissioner of Revenue, 26 Mass. App. Tax Bd. Rep. 493, 513 (finding that "it was the business operations and management [by Talbots' Massachusetts headquarters employees] which increased the intangibles' value" and accordingly, "the income-producing activities which gave rise to the intangibles' value through name recognition and customer appreciation were conducted more in the Commonwealth than in any other state.").  The Board thus found and ruled that the appellants failed to provide a comprehensive analysis of all direct costs associated with BPHA's licensing of its local broadcast rights to the three local broadcasters.
Second, the appellants failed to prove that all the direct costs attributable to Massachusetts were less than the direct costs attributable to any one particular state.  The appellants had the burden of proving that a greater proportion of its income-producing activity associated with the licensing of its local broadcast rights was performed in any single state other than Massachusetts.  See Interface, 26 Mass. App. Tax Bd. Rep. at 14-15 and Surel, 24 Mass. App. Tax Bd. Rep. at 43.  
The Board found and ruled that the appellants failed to meet their burden of proving that the Commissioner improperly included one hundred percent of the revenue attributable to BPHA's licensing of its local broadcast rights in BPHA's sales factor.  Accordingly, the Board did not grant relief from this portion of the Commissioner's assessment.

BPHA's licensing of national and international broadcast rights.

The appellants argued that none of BPHA's receipts from its licensing of national and international broadcasting rights was attributable to Massachusetts.  Citing 830 CMR 63.38.1(9)(d)3.c.i, the appellants argued that the receipts from the licensing of intangible property should have been attributed to the place where the property was used by the licensee, and according to that regulation, that place is presumed to be the licensee's commercial domicile.  830 CMR 63.38.1(9)(d)3.c.i provides in pertinent part:
For purposes of 830 CMR 63.38.1(9)(d)3.c, the use of intangible property is deemed to occur in the state of commercial domicile of the licensee unless the taxpayer or the Commissioner demonstrate that the property is actually used in or geographically associated with another specific state, and that such actual use or association exceeds the use in or association with the state of commercial domicile. . . . (emphasis added).

The appellants argued that, because none of the broadcasters who licensed with the NHL for BPHA's national and international broadcast rights had their commercial domicile in Massachusetts, then none of the income-producing activities in connection with the licensing of BPHA's national and international broadcast rights should have been apportioned to Massachusetts.
However, the Board found and ruled that, even assuming the application of that regulation, the appellants failed to prove that the Commissioner erred in including one hundred percent of BPHA's share of receipts from the licensing of its national and international broadcast rights.  First, the Board found that Mr. Barry's analysis included many irrelevant costs and also failed to include all relevant direct costs.  In looking solely to the costs of the various broadcasters, the appellants neglected to cite a key portion of the above regulation, which later provides that "[a]ctual use shall not include activities of sublicensees, provided that the Commissioner may consider activities of sublicensees in the case of licensing, sublicensing, or other sales agreements among affiliated taxpayers."  The facts establish that the broadcasters who licensed the national and international broadcast rights from the NHL - SportsChannel America, ESPN/ESPN2, NBC, ABC, Fox, and Molson - were actually sublicensees of BPHA.  The parties stipulated that pursuant to the NHL Constitution and By-Laws, BPHA was the exclusive owner of all broadcasting rights for games played in its own home territory.  The parties also stipulated that, pursuant to the TWX Agreement, BPHA granted these rights to the NHL and authorized the NHL to sublicense these broadcast rights.  These stipulations establish that the national and international broadcasters were sublicensees of BPHA with respect to BPHA's national and international rights.  Accordingly, pursuant to the regulation cited by the appellants, the income-producing activities of BPHA with respect to its national and international broadcast rights "shall not include activities of sublicensees . . . ."  830 CMR 63.38.1(9)(d)3.c.i.
Moreover, as with BPHA's licensing of its local broadcast rights, an analysis of the licensing of its national and international rights must include the income-producing activities of BPHA in developing and maintaining a valuable NHL franchise.  The appellants failed to include BPHA's costs of performance with respect to developing and maintaining the Bruins.  See General Mills, 26 Mass. App. Tax Bd. Rep. at 513.  The Board thus found and ruled that the appellants' analysis of costs of performance relative to BPHA's licensing of its national and international broadcast rights was incomplete.
Second, the appellants failed to prove, by an analysis of its direct costs, that a greater proportion of its income-producing activity associated with the licensing of its local broadcast rights was performed in any single state other than Massachusetts.  The Board has previously found that an appellant cannot simply rely on the fact, even if true, that it incurred more direct costs in all other states combined than it did in Massachusetts.  See Interface, 26 Mass. App. Tax Bd. Rep. at 14-15 and Surel, 24 Mass. App. Tax Bd. Rep. at 43.  
The Board thus found and ruled that the appellants failed to prove that the Commissioner improperly included one hundred percent of the revenue attributable to BHPA's licensing of its national and international broadcast rights in BPHA's sales factor.  Accordingly, the Board did not grant relief from this portion of the Commissioner's assessment.

BPHA's licensing of the Bruins logos and trademarks.

Citing 830 CMR 63.38.1(9)(d)3.c.1, the appellants argued that none of BPHA's revenues from licensing its logos and trademarks to the NHL and NHL-related entities should have been attributable to Massachusetts, because none of the licensees had a commercial domicile in Massachusetts.  However, as with their arguments with respect to the licensing of BPHA's broadcasting rights, the appellants' analysis of costs of performance with respect to the licensing of the Bruins logos and trademarks was flawed and incomplete.   
First, the Board found that the appellants' analysis should have included the many costs incurred by BPHA in developing and maintaining a marketable NHL franchise.  The regulation requires a complete analysis of every income-producing activity associated with the licensing of the logos and trademarks, which "includes the use of the intangible property" by other licensees, but in no way ends with that consideration.  By failing to include expenses which were necessary in developing and maintaining a valuable NHL franchise, including among other expenses the salaries paid to players, trainers, and coaches, and the costs of marketing and advertising the Bruins, the appellants' analysis was incomplete and flawed.  See General Mills, 26 Mass. App. Tax Bd. at 513.  Moreover, the appellants failed to even consider the salary paid to the executives, especially Mr. Sinden, the General Manager of the Bruins who approved the final logos.  Pursuant to the regulation that the appellants cite, the commercial domicile of BPHA in Massachusetts is crucial for sourcing to Massachusetts the costs of performing this vital task.
Second, the appellants failed to produce evidence that the costs of performance with respect to the licensing of Bruins logos and trademarks were greater in any one state other than Massachusetts.  The appellants thus failed to prove that a greater proportion of its income-producing activity associated with the licensing of the Bruins logos and trademarks was performed in any single state other than Massachusetts.  See Interface, 26 Mass. App. Tax Bd. Rep. at 14-15 and Surel, 24 Mass. App. Tax Bd. Rep. at 43.  
The Board found and ruled that the appellants failed to prove that the Commissioner improperly included one hundred percent of the revenue attributable to BHPA's licensing of its logos and trademarks.  Accordingly, the Board did not grant relief from this portion of the Commissioner's assessment.  

BPHA's ownership of thirty-one percent limited partnership interest in NESN.

BPHA was a unitary business whose activities included the ownership of a partnership interest in NESN.  The appellants, citing 830 CMR 63.38.1(13)(d)3, stated that as a limited partner, BPHA was required to include its pro rata share of partnership income in its taxable net income, including its pro rata share of NESN's Massachusetts sales receipts.  See 830 CMR 63.38.1(13)(d)3.  Citing 830 CMR 63.38.1(9)(d)3.c, the appellants argued that affiliate income and advertising income from NESN's non-Massachusetts affiliates and advertisers should have been sourced to the commercial domiciles of the affiliates and advertisers and, accordingly, excluded from the numerator of BPHA's sales factor.  Moreover, they argued, the individual subscribers of NESN were also licensees of NESN and, accordingly, the revenue from non-Massachusetts subscribers should have likewise been excluded from the numerator of BPHA's sales factor.  
Even assuming arguendo that BPHA's income-producing activity with respect to its ownership of a limited partnership interest in NESN would include the income-producing activities of NESN, the Board found and ruled that the appellants' costs of performance analysis was incomplete and flawed.  First, the appellants failed to consider the many costs associated with NESN's programming, including the salaries paid to its staff working in Massachusetts.  Moreover, as with BPHA's licensing of its broadcast rights and trademarks, the appellants' direct-cost analysis should have included the many costs incurred by BPHA in developing and maintaining a marketable NHL franchise, because the development of the Bruins was a necessary activity in creating the Bruins games for NESN to program.  See General Mills, 26 Mass. App. Tax Bd. Rep. at 513.  
Second, the appellants failed to prove that a greater proportion of the income-producing activities associated with BPHA's ownership of an interest in NESN was performed in any single state other than Massachusetts.  The Board noted that this point would have been enormously difficult to prove where the commercial domicile of NESN was in Massachusetts and more than two-thirds of its individual subscribers were Massachusetts residents.  See Interface, 26 Mass. App. Tax Bd. Rep. at 14-15 and Surel, 24 Mass. App. Tax Bd. Rep. at 43.  
The Board found and ruled that the appellants failed to prove that the Commissioner improperly included one hundred percent of the revenue attributable to BHPA's ownership of a limited partnership interest in NESN.  Accordingly, the Board did not grant relief from this portion of the Commissioner's assessment.  
Based on these rulings, the Board found and ruled that the Commissioner did not improperly calculate BPHA's sales factor for purposes of the corporate excise.  Accordingly, the Board upheld the Commissioner's assessments of BPHA and the Jacobs based on the Commissioner's calculation of BPHA's sales factor.

Calculation of BPHA's property factor.
Pursuant to G.L. c. 63, § 38(d), a corporation's property factor is calculated as follows:
The property factor is a fraction, the numerator of which is the average value of the corporation's real and tangible personal property owned or rented and used in this commonwealth during the taxable year and the denominator of which is the average value of all the corporation's real and tangible personal property owned or rented and used during the taxable year. (emphasis added). 

The parties stipulated that, for purposes of calculating its property factor only, that all real and tangible property used by NESN and BPHA during the tax years at issue, other than the satellites used by NESN, was used in Massachusetts.  The parties also stipulated, and the Board found, that NESN paid GE, pursuant to the C-3 Satellite Agreement and the IR Satellite Agreement, for the right to transmit its signal to the satellites and then rebroadcast the signal back to earth where the NESN affiliates picked up the signal.  The appellants, however, argued that BPHA's pro rata share of amounts paid by NESN pursuant to the satellite agreements should have been included in the denominator of BPHA's property factor but not in the numerator of the factor.  The appellants argued that the amounts paid pursuant to the agreements amounted to a rental of a portion of the satellites.  They also argued that the rental did not occur in Massachusetts, but in outer-space.  Therefore, they argued, the payments constituted an out-of-state rental of property to be included in the denominator but not the numerator of BPHA's property factor.
	The Board, however, found and ruled that the C-3 Satellite Agreement and the IR Satellite Agreement between GE and NESN were not for the rental of property but instead for a service - GE's transmission of NESN's signal.  The agreements specify that GE was providing NESN with "preemptible satellite transponder service" (emphasis added).  The Board thus found and ruled that the fees paid by NESN were not for the ownership or rental of property as required by § 38(d).  
Moreover, the apportionment suggested by the appellants - inclusion of NESN's payments in BPHA's denominator but not in its numerator - would result in "nowhere" property, because the fees would reduce BPHA's Massachusetts property factor but not be taxed by any jurisdiction.  The Board found that § 38(d) should not be interpreted in a manner that would create "nowhere" property because this interpretation would produce an absurd result.  See Manning v. Boston Redevelopment Authority, 400 Mass. 444, 453 (1987) ("A statute or ordinance should not be construed in a way that produces absurd or unreasonable results when a sensible construction is readily available.").  Accordingly, the Board found and ruled that the Commissioner did not err in excluding BPHA's pro rata share of NESN's payments in BPHA's property factor.

Conclusion.
A taxpayer who claims to be aggrieved by the refusal of the Commissioner to abate a tax in whole or in part has the burden of establishing the right to an abatement.  Staples v. Commissioner of Corp. & Tax., 305 Mass. 20, 26 (1940).  See also Commissioner of Corp. & Tax. v. Filoon, 310 Mass. 374, 376 (1941); Stone v. State Tax Commission, 363 Mass. 64, 65-66 (1973).  The Board found and ruled that the appellants failed to meet their burden of proving BPHA's entitlement to abatements for each of the tax years at issue.  Likewise, because the Jacobs' income is derived from Mr. Jacobs' shareholder interest in BPHA, a Massachusetts Domestic S corporation, the Board also found and ruled that the appellants failed to meet their burden of proving the Jacobs' entitlement to abatements. 




Accordingly, the Board issued decisions for the appellee in these appeals.

	    					APPELLATE TAX BOARD	

																	By:____________________________
				    Abigail A. Burns, Chairman 


A true copy:


Attest: _____________________
          	           Clerk of the Board

 During the tax years at issue, NESN, Inc. was the sole general partner of NESN and owned a three percent interest in NESN.  BPHA was a limited partner of NESN and owned a thirty-one percent interest.
  Hockey seasons span consecutive months within two calendar years.  For example, the first hockey season that incorporates the tax years at issue is the 1990-1991 season.
 Mr. Barry explained that these would include credit card fees and certain advertising expenses associated with season tickets.
 Mr. Barry explained that "other" expense would cover, among other things, immigration fees, moving expenses, and gift and party expenses.
 The breakdown of games for tax years at issue was as follows:  4 home games (2 regular season, 2 playoff) and 44 away games (1 preseason, 35 regular season, 8 playoff) in 1991; 4 home games (3 regular season, 1 playoff) and 46 away games (1 preseason, 38 regular season, 7 playoff) in 1992; 3 home games (regular season) and 41 away games (1 preseason, 38 regular season, 2 playoff) in 1993; 2 home games (playoff) and 29 away games (1 preseason, 22 regular season, 6 playoff) in 1994.
 The breakdown of games for tax years at issue was as follows:  47 home games (39 regular season, 8 playoff) and 5 away games (2 preseason, 2 regular season, 1 playoff) in 1991; 43 home games (36 regular season, 7 playoff) and 3 away games (1 preseason, 2 regular season) in 1992; 40 home games (38 regular season 2 playoff) and 5 away games (1 preseason, 4 regular season) in 1993; 30 home games (1 preseason, 24 regular season, 5 playoff) and 7 away games (5 preseason, 2 regular season) in 1994.
 The NHL sublicensed its national and international broadcast rights to the following broadcast sublicensees:  SportsChannel America (1988-1992); ESPN/ESPN2 (1992-1999); NBC (All-Star Games) (all tax years at issue); ABC (Playoff Games) (1992-1993); Fox (1994-1999); and Molson (all tax years at issue).
 The Board also noted that BPHA did not pay rent for the use of the Boston Garden during the Bruins' practices or for the office space for its executive and administrative staff.  The Board did not make a determination of whether payments based on fair market value of rent for the Boston Garden or the office space should have been included as direct costs of BPHA incurred in Massachusetts.  The finding would not have been necessary to these appeals because the appellants failed to meet their burden of proving that the costs of performance in any one state exceeded the costs of performance in Massachusetts, even without consideration of a fair market rental payment for use of the Boston Garden facilities.
 830 CMR 63.38.1 was promulgated on February 5, 1999 and amended on March 31, 2000.
 The Board did not make a finding as to whether NESN's subscribers were licensees of NESN.  This finding was not necessary to the Board's ruling because the appellants did not meet their burden of proving that a greater proportion of the income-producing activities was performed in any single state other than Massachusetts.

ATB 2003-323