PGA Tour “disqualified” from its tax-exempt status
The PGA Tour x LIV Golf merger has not come without drawbacks, and it hasn't even taken shape just yet. As the Justice Department and others reviewed the merger, a new bill has been brought forth to effectively remove the Tour's tax-exempt status.
PIF, the Saudi fund that backs LIV Golf and would back the Tour, would be ineligible for major tax breaks as well.
Senator Ron Wyden (Democrat from Oregon and chairman of the committee) announced two new bills on Wednesday: “The Sports League Tax-Exempt Status Limitation Act” and “The Ending Tax Breaks for Massive Sovereign Wealth Funds Act.”
The tour currently exists as a 501(c)(6) organization. That status grants tax exemptions for professional sports leagues in the United States. The PGA Tour is the largest sports group with this status behind the NFL and MLB.
LIV Golf x PGA Tour merger has consequences already
As for the PIF, American law exempts sovereign wealth funds and foreign government investment funds from a 30% withholding tax on payments including dividends and interest, therefore rendering it ineligible for the breaks.
Senator Wyden said via Golf Digest:
“Most of America’s big pro sports leagues gave up their tax exemptions voluntarily when their revenues climbed into the stratosphere, and they hadn’t even shamed themselves with Saudi blood money. An organization that betrays its own word and agrees to become a profit generator for Saudi Arabia’s brutal regime has disqualified itself for a tax exemption. Many of the biggest sovereign wealth funds out there belong to countries that do not have our interests at heart, and there’s no good reason for hardworking American taxpayers to have to subsidize their huge profits."
Senator Wyden opened an investigation into the structure and implications of the merger last month. He and many others were concerned about censorship and national security concerns since the tour’s real estate holdings are near some of America's military sites.
The problems may not stop there. The probe by the Department of Justice is currently ongoing as well. Their findings could put the entire merger at risk. The DOJ investigation has gotten even more widespread, also encompassing Augusta National Golf Club, the PGA of America and the USGA.
This isn't the first time the PGA Tour has faced issues like this. The Federal Trade Commission conducted a four-year inquiry into whether the tour violated antitrust laws in the 1990s. They did so thanks to a rule giving permission for a conflicting-event release.
Ironically, that's the rule the Tour has cited this year in efforts to suspend LIV Golf members who defected from the PGA Tour. At the time, the FTC recommended federal action but nothing happened. They may not be so lucky this time around.