The PGA Tour is one of the most charitable organizations going and thanks to a last-minute change to the tax bill that passed late Saturday night, they can stay that way.
According to GolfDigest.com’s John Paul Newport, a provision in the Senate’s tax-reform act could have had a major impact on the way the PGA Tour and other professional sports leagues file and pay their taxes. However, an 11th-hour adjustment to the bill avoided a major shake-up in how the Tour does its business.
Newport explained the details of the bill as it could have affected the PGA Tour.
The PGA Tour seems to have dodged a bullet in the wee hours of Saturday morning when the Senate’s tax-reform act passed without a provision in it revoking the tour’s cherished tax-exempt status.
As late as Friday, a 14-line subsection titled “Repeal of Tax-Exempt Status for Professional Sports Leagues” was still included in the publicly available version of the bill.
Although the tour is not commonly thought of as a “sports league,” it is one for the purposes of the legislation, and in the eyes of the Internal Revenue Service. The provision also threatened the tax status of the LPGA and the PGA of America, the latter because it runs golf tournaments such as the PGA Championship, the Women’s and Senior PGAs and the Ryder Cup.
But the provision went missing from the final version of the Senate bill. It is unclear who or what was responsible for the disappearance. In the chaotic final hours of negotiations—almost all behind closed doors—dozens of revisions, deletions and amendments were made to the bill, many of them highly significant. Altogether the bill shrunk from 515 pages to 479 pages.
The House version of the tax bill that passed on Nov. 16 included no provision related to the tax-exempt status of pro sports leagues. The Senate and House bills must be reconciled, and the unified bill approved by both houses, then signed by President Trump. It appears for now that golf organizations are safe.
PGA of America CEO Pete Bevacqua said he did reach out to political contacts in Washington to advance golf’s perspective, but declined to comment on specifics.
In a statement to Golf Digest on Saturday, PGA Tour commissioner Jay Monahan said, “We know we speak for the thousands of charities, communities and citizens across the country who have been positively impacted by the PGA Tour’s commitment to giving back when we say we are extremely pleased that the provision affecting our tax-exempt status was removed from the tax reform bill passed by the Senate last night.”
If the deleted provision was to become law, the tour and its sister organizations would have some serious scrambling to do. In 2015, when Congress was considering similar legislation, then PGA Tour commissioner Tim Finchem argued in a letter to the Senate Finance Committee that a loss of tax-exempt status would require the tour to significantly modify its structure and would “drastically reduce the available tax incentives to attract charitable corporate support.” Most of the tour’s U.S. tournaments are organized to benefit local charities.
In his statement Saturday, Monahan echoed Finchem’s earlier take. “The PGA Tour is unique in the world of sports, in that we have had a long-standing commitment to dedicate net proceeds of our tournaments to thousands of charities; since our formation in 1968 by Arnold Palmer and Jack Nicklaus, the PGA Tour and its tournaments have generated more than $2.6 billion for charity, and we expect another record amount from the 2017 season. Giving back will always be at the heart of the PGA Tour, and we are pleased that we will be able to continue improving the lives of those in the communities where we play.”
A change in tax status as envisioned in the provision would also have impacted the National Hockey League and the United States Tennis Association. Unaffected, however, would be the three highest profile pro sports leagues: the NFL, MLB and the NBA. They have either voluntarily renounced tax-exempt status (the NFL and MLB) or never had it in the first place (NBA).
The individual teams in a sports league—or individual players, in the case of golf and tennis—are not exempt from taxes, only the league itself and the league office. Exception: The NFL’s Green Bay Packers are run as a non-profit.
The USGA, organized as a different type of tax-exempt entity—501 c(3) rather than 501 c(6)—would not be affected, according to a spokesperson.
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