The Light at the End of PGA’s Exempt Tunnel is a Fast Train Coming
It’s just a matter of time now before PGA voluntarily relinquishes its exempt status or its status is revoked by legislation or IRS action. Last week we reported that PGA intends to form a “whole hospital” joint venture with LIV Golf, the European PGA, and a Saudi Arabian sovereign wealth fund. That was actually strike two against exempt status. Strike one happened when PGA engaged in anti-competitive behavior designed to deprive LIV Golf of necessary inputs (i.e., players). Some interesting follow up reporting indicates the Saudi pitcher is winding up for strike three.
It seems that PGA read the writing on the wall. It realized that money talks and that trying to compete with the Saudis with its measly $1.6 billion tax free war chest was like bringing a slingshot to the OK Corral. At a “secret meeting,” reportedly organized by an obscure shadowy fella named Eldrick Woods, players suggested getting rid of 501(c)(6) status so the PGA could attract private investors. “If the Tour were to privatize, heavy-hitting investors such as McManus (and his best friend Dermot Desmond) and private equity firms could pump in billions of dollars.” That PGA desperately wants to compete at all, despite its status as golf’s Better Business Bureau is rather telling.
Anyway, on Sunday came news that PGA might grant equity interests to players. If that isn’t strike three, it’s definitely high heat under the chin for PGA’s exempt status. PGA will grant equity interests, allowing players to “participate” in future revenue growth and then hurl itself into a for-profit joint venture allowing the Saudi PIF another equity stake. Only as a taxable entity in my opinion.
And then just yesterday, Senator Richard Blumenthal fired off letters to PGA and LIV demanding a whole slew of information, some regarding PGA’s tax exempt status. Here is some of what Senator Richard Blumenthal is demanding from PGA and LIV Golf:
PGA Tour has stated that it intends to preserve its tax-exempt status as a Section 501(c)(6) entity after the agreement is executed. This assertion raises additional questions about the terms of the agreement and whether a foreign government may indirectly benefit from provisions in U.S. tax laws meant to promote not-for-profit business associations. To assist the Subcommittee’s inquiry, please provide the documents and information listed below by June 26, 2023.
1. All records referring or relating to the relationship between PGA Tour and LIV Golf, including but not limited to all communications referring or relating to the Agreement.
2. All records referring or relating to the relationship between PGA Tour and PIF or any of its officers, agents, or other representatives, including but not limited to all communications with Members of the Board of PIF or the Executive Management of PIF referring or relating to the Agreement.
3. All records referring or relating to the Agreement, including but not limited to all internal or external communications related to the possibility of entering the Agreement, and all records related to the structure of the “new, collectively owned, for-profit entity” to be formed by the Agreement.
4. All communications between the PGA Tour Commissioner, PGA Tour Board of Directors, PGA Tour Player Advisory Council, and/or PGA Tour Executive Leadership concerning LIV Golf, including but not limited to communications concerning risks to PGA Tour posed by LIV Golf, ownership of LIV Golf, and Saudi Arabia’s influence on LIV Golf.
5. All records referring or relating to any dispute between PGA Tour and PIF, LIV Golf, Jay Monahan, or Yasir Al-Rumayyan.
6. All records referring or relating to PGA Tour’s tax-exempt status under Section 510(c)(6) of the Internal Revenue Code, including but not limited to communications related to whether and how to preserve PGA’s tax-exempt status following execution of the Agreement.
7. All records produced in response to any inquiry or investigation by any law enforcement or regulatory agency regarding the Agreement, PGA Tour’s interactions or communications with PIF or LIV Golf, and PGA Tour’s tax-exempt status or eligibility.
8. All organizational charts reflecting corporate structure, officers, directors, and employees for PGA Tour as it is currently formed, as well as for any new entity formed as a result of the Agreement.
Business leagues are good because business is good. It’s our real religion. We worship capitalism more than anything else. So it makes sense to exempt an organization that works to improve business conditions. Just like any other church or house of worship. And it makes sense that the organization is chosen from industry participants. Who better to know and neutrally cultivate business conditions? But when the preacher starts acting like one of the congregants competing for the front pews and damning other congregants with anti-competitive behavior — like a modern day Jim Jones or something, its probably time to go. And for the PGA that time is just about now.
darryll jones