The Senate finance committee has introduced legislation that would revoke the PGA Tour’s tax exemption status and deem Saudi Arabia’s Public Investment Fund ineligible for lucrative tax breaks.
Senator Ron Wyden (D-Ore.), chairman of the committee, announced two new bills Wednesday evening, “The Sports League Tax-Exempt Status Limitation Act” and “The Ending Tax Breaks for Massive Sovereign Wealth Funds Act.” The tour exists as a 501(c)(6) organization, a status that bestows tax exemptions for professional sports leagues and chambers of commerce. The PGA Tour is the largest sports group with this status after the National Football League and Major League Baseball surrendered their exemptions. Regarding PIF, U.S. law exempts sovereign wealth funds and similar foreign government investment funds from a 30-percent withholding tax on payments such as dividends and interest.
“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,” said Wyden, clearly calling out the PGA Tour and its recent decision to create a framework agreement to work with the PIF for creating a for-profit entity after chastising the PIF for the previous year. “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.”
Last month Senator Wyden opened an investigation into the financial structure and implications of the proposed PGA Tour-Saudi deal, citing censorship and national security concerns given the tour’s real estate holdings near U.S. military sites. This effort is separate from the Senate’s Permanent Subcommittee on Investigations query, which also has threatened to strip the tour’s tax-exempt status over the Saudi deal, although the proposed partnership between the tour and PIF would be a for-profit entity.
An antitrust probe by the Department of Justice spurred by the advent of LIV Golf is also ongoing. The DOJ investigation has spread to include other golf entities, including Augusta National Golf Club, the PGA of America and the USGA.
This is not the first time the PGA Tour has faced government scrutiny. In the early 1990s, the Federal Trade Commission concluded a four-year investigation into whether the tour violated antitrust laws—partially due to a rule stipulating permission for a conflicting-event release, which the tour has invoked this year to suspend those who have defected to LIV Golf. At the time, the FTC recommended federal action, but none was ultimately taken, a circumstance credited to the work of then-PGA Tour Commissioner Tim Finchem (a lawyer himself who worked in President Jimmy Carter’s administration) and the tour’s lobbying mastery. Coincidentally, this clashed with LIV Golf CEO Greg Norman’s first try to challenge the PGA Tour through his attempt to launch the World Tour.