Golfers from around the world are hoping to win the PGA Championship this weekend.
You may be familiar with the PGA Tour and it being golf’s premier league, but what you might not know is that the PGA is a nonprofit organization. Indeed, all PGA events are considered “charity events” and are exempt from federal income taxes on earnings, even though the organization claimed its revenues were close to $2 billion.
Last year the PGA tour raised more than $166 million for its charities, but if the organization brought in $2 billion, that is just 8% of its revenues given to charity. According to an ESPN investigation, “24 of the 25 PGA Tour nonprofit tournaments spend less than 50 percent on charity, and, in one case, running a PGA tournament actually caused a charity to lose money—more than $4.5 million over two years.”
As pointed out by the 2012 Wastebook, “These organizations are taking advantage of the provision of the tax code that allows industry and trade groups, such as the U.S. Chamber of Commerce or the Natural Resources Defense Council, to qualify as nonprofit and tax-exempt. None of these groups can promote a specific brand within an industry but each may promote an industry as a whole.”
While the PGA does promote golf as a sport, it is not designed to just promote golf. It is designed to make money, and taxpayers should not have to subsidize billion dollar leagues or its millionaire players.
The questionable use of a tax-exemption is not the only loophole the PGA utilizes. Foreign born players like Hideki Matsuyama, the top earner on this year’s tour so far ($7.7 million), will pay no federal taxes on winnings from PGA tournaments this year. This is because of a tax-loophole created by Congress in 1986 that provides a tax-exemption for foreign born athletes that play in United States charity tournaments.
The Senator who crafted the amendment said it would lift the burden on world professional athletes who play charity sports tournaments in the United States. “At the moment, if you are in the United States over 180 days, you are taxed on your worldwide income. It is causing a number of athletes to be reluctant to come and play in our charity sports tournaments, where the money is raised for charity, because it counts toward the 180 days. This amendment simply says when they are playing here in a charity sports tournament, the days they are playing will not be counted toward the 180 days.”
While this amendment sounds well intentioned, it is really just a giveaway to the PGA Tour and the foreign born players who play in it. Essentially, foreign golfers could live in the U.S. for the PGA Tour’s “charity events” and not be subject to taxes on their income.
Taxpayers should not be forced to subsidize sports leagues like the PGA who pay out million dollar salaries, collect billions in revenues, but only donate a small amount to charity. In sum, the PGA Tour has strung together a train of birdies while taxpayers are forced to settle for bogie.