SBD/December 16, 2013/Leagues and Governing Bodies

PGA Tour's Tax-Exempt Status Called Into Question After Proposed Legislation

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Experts estimate the lost tax revenue from the PGA Tour could top $200M
The PGA Tour's tax-exempt status as a non-profit organization allows it to generate "millions of dollars tax-free," according to ESPN's Paula Lavigne. But U.S. Sen. Tom Coburn (R-Okla.) has introduced legislation that would strip pro sports leagues of tax exempt status, and Lavigne said when Coburn's office "calculated how much tax-free revenue each sports league generated, one stood out." Lavigne: "The PGA Tour has been able to stockpile $700 million dollars on which it hasn’t had to pay taxes. And what’s more, most individual tournaments are run as public charities. Together, that means lots of tax breaks to support lavish tournaments awarding millions to professional golfers." Coburn said he was not "just picking on" the PGA Tour, but taxpayers subsidizing the Tour with $8-9M per year is "ludicrous." Lavigne noted complex tax codes "made it to hard to say exactly how much lost tax revenue we're talking, but tax experts estimate it could add up" to over $200M over the past 20 years. That does not include the "tournaments themselves that are tax-exempt charities under the PGA Tour brand, with some of those also not paying sales tax." The show examined the "finances of all 25 U.S. tournaments on the PGA Tour that operate as charities." On average, 16% of the spending "goes to charitable grants or services," which is "far below" the recommended 65%. But the PGA Tour stated it has donated $1.1B to various charities in the past eight years, and one should "consider that it took the NFL 40 years to donate just a third of that." Lavigne also notes the Tour's stance that the recommended 65% threshold "doesn't apply to PGA Tour tournament charities because they don't necessarily run charitable programs, they just raise money for them" ("OTL," ESPN2, 12/15).

POINT/COUNTERPOINT: A GOLF.com roundtable examined the Tour's tax-exempt status, with SI's Alan Shipnuck saying, "If you take away the tax-exempt status, the whole business model falls apart. The government would get a slice, but the overall size of the pie would shrink dramatically. So paying the bloated salaries of all the VPs in Ponte Vedra Beach is an unfortunate cost of doing business." SI's Gary Van Sickle: "It's pretty obvious that the NFL, NHL and the PGA Tour and all of the other major pro sports are businesses. They raise money for charity, some much more than others, but they're businesses. I'd hate to see anything hurt the amount of money the golf charities receive, but [PGA Tour Exec VP & Chief Global Communications Officer Ty Votaw] is a smart guy." Golf.com's Eamon Lynch added, "Nonprofits are not the same as charities, and I think the PGA Tour fairly qualifies as a nonprofit by the legal definition. I'd also argue that there is considerable value for charities in using the Tour as a marketing platform" (GOLF.com, 12/15).
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