Should The Rangers' Playoff Game In Toronto Have Triggered The End of MSG's $555 Million Tax Break?

When the Carolina Hurricanes bounced the New York Rangers from the Stanley Cup bubble with a 4-1 win on August 4th, it seemed like a mere footnote in a sports season turned upside down by the coronavirus pandemic. The Rangers players packed up and went home from Toronto, one of the two Canadian cities where the Stanley Cup playoffs are being held under quarantine rules, and everyone hoped that they could return in the fall to their usual home at Madison Square Garden.

Except that, according to a provision of New York state tax law, that final game in Toronto should have had lasting consequences for the team and the city treasury. That’s because it was designated by the NHL as a “home” game for the Rangers, not only allowing players to wear their home blue jerseys, but also giving the team the in-game advantage of making line changes after seeing what moves their opponent has made.

And the state tax law passed in 1982 that granted the Rangers’ owners their $555-million-and-counting tax exemption for Madison Square Garden explicitly states that any home games played outside the Garden cause the tax break to immediately expire:

Rangers/Knicks/MSG owner and blues-rock cosplayer James Dolan has been well aware of the home-game provision in Section 429 of the tax law: In 2014 and again in 2018, when Rangers players took the ice in special-occasion outdoor games at Yankee Stadium and Citi Field, team execs made sure to have the NHL designate them as road games, for tax purposes.

So what changed this time, other than a global pandemic?

While Governor Andrew Cuomo has issued a slew of executive orders waiving various provisions of the law for the duration of the pandemic, from suspending vehicle registration renewals to allowing unlicensed individuals to conduct COVID-19 swabs, he doesn’t appear to have touched Section 429. Some sports and tax experts have suggested that the playoff game could be forgiven thanks to the national emergency—Stanford University sports economist Roger Noll noted that there’s some case law that laws can be overturned if they’re impossible to comply with. But neither the state nor city seems to have proactively made that determination in this case.

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.

That’s not what the language of the tax law says, though, and it’s unclear whether a contractual agreement between the city and the Garden can trump state law. Ultimately, enforcement of the MSG tax-restoration provision is up to the city Finance Department, which had not provided a comment by press time. (In 2014, the Times reported that city Finance “could not definitively say” whether Madison Square Garden would have lost its exemption if the Rangers had played a single home game at Yankee Stadium.) Which means Mayor Bill de Blasio could theoretically move to strip MSG of its tax break—something he’s called for doing in the past.

So far, no local elected officials seem to want to blow the whistle on MSG solely on the basis of the home-game clause. City Councilmember Costa Constantinides, who along with eight other councilmembers last month penned an open letter to the mayor and governor calling for New York’s sports teams to pay their full property taxes, declined to comment on the home-game clause. Assemblymember Sandy Galef, chair of the assembly committee on taxation, said her committee would not be investigating, directing all questions to New York City.

State Senator Brian Kavanagh, who has introduced bills to repeal MSG’s tax break, told Gothamist that while “I'm not really interested in penalizing MSG on a technicality, especially one in which public health is the primary concern,” he maintains that “the City is in crisis and it's time for James Dolan to step up” and start paying taxes. (Kavanagh’s bill to force Dolan to do so is currently resting comfortably in committee, where his previous bills have ended their days.)

For now, the Garden’s get-out-of-taxes-free card lives on, nearly three decades after its drafters initially meant it to expire, and is set to cost the city treasury another $43 million in 2021, according to Independent Budget Office projections. And while it might seem petty to try to make a multi-million-dollar decision based on a technicality, it’s worth remembering that’s how the MSG tax break got enshrined—permanently—in state law in the first place.