The saga involving the PGA Tour and Saudi Arabia’s Public Investment Fund-backed LIV Golf continues. After the rival golf leagues announced a surprising partnership of sorts last week, a U.S. House of Representatives member proposed legislation to repeal the PGA Tour’s tax-exempt status. A Senate subcommittee has also launched an investigation into the joint golf venture.
"PIF’s role as an arm of the Saudi government and PGA Tour’s sudden and drastic reversal of position concerning LIV Golf raises serious questions regarding the reasons for and terms behind the announced agreement.” Sen. Richard Blumenthal (D-Conn.) wrote that in a June 12 letter to PGA Commissioner Jay Monahan. (The Public Investment Fund, "PIF," is a Saudi Sovereign Wealth Fund.) Monahan has just recently taken a leave of absence for an undisclosed medical situation.
Blumenthal, head of the U.S. Senate Permanent Subcommittee on Investigations, is requesting documents and other details of the agreement. The aim of the investigation is to determine whether the PGA Tour can maintain its tax-exempt status as a 501(c)6 exempt organization.
Senate Committee Investigating PGA-LIV Joint Venture
The “sudden and drastic reversal” that Blumenthal mentions refers to a years-long legal battle between the two rival golf leagues.
- LIV Golf launched its season in 2022 with backing (to the tune of billions of dollars) from PIF.
- Big names from the PGA Tour, including Phil Mickelson and Brooks Koepka, cut ties to join LIV Golf. Other PGA Tour members turned down lucrative offers from the LIV circuit. The PGA’s commissioner suspended numerous PGA Tour players for participating in LIV Golf tournaments.
- Several players argued that the organization violated antitrust laws and sued the PGA Tour. PGA Tour countersued, alleging that LIV Golf illegally interfered with PGA Tour player contracts.
In a June 9 letter reportedly written by Monahan to Congress (obtained by Politico), Monahan argues that the announced alliance isn’t “a merger between PGA Tour, LIV Golf, and PIF.” Instead, Monahan says, PIF’s involvement is that of an investor in PGA golf, not unlike other U.S.-based investors.
“The PGA Tour and its tournaments will continue to operate as they do today, generating significant charitable and economic impact in the communities where they are played,” Monahan wrote. Monahan explains that the PGA Tour spent millions of dollars in litigation with LIV Golf, but says, the organization “was largely left on our own to fend off the attacks, ostensibly due to the United States’ complex geopolitical alliance with the Kingdom of Saudi Arabia.”
Bill Would Strip PGA Tour of Tax-Exempt Status
Tax issues surrounding the PGA Tour-LIV Golf venture are potentially considerable. Organizations designated as tax-exempt under Section 501(c)6 of the Internal Revenue Code, including professional sports leagues like the NHL, and the PGA Tour, can generally avoid paying federal corporate income taxes. When you consider the PGA Tour is a $1.5 billion business according to Golf Digest, that’s a lot of money largely shielded from federal taxation.
Rep. John Garamendi (D-Calif.) has introduced a bill to strip the PGA Tour of its tax-exempt status. If passed, the “No Corporate Tax Exemption for Professional Sports Act,” would result in the PGA Tour and other professional sports leagues losing the ability to claim 501(c)6 tax-exempt status.
“This merger flies in the face of the PGA players who turned down hundred-million-dollar paydays from the Saudi-backed LIV to align themselves with the right side of history and human decency,” Garamendi said in a statement released not long after the alliance was announced. “The notion that the Saudi Sovereign Wealth Fund would pay zero dollars in taxes on their blood money and potentially billions of dollars in profits while countless American families pay their fair share while struggling to make ends meet is ludicrous,” Garamendi added.
Garamendi’s reference to “blood money” concerns alleged Saudi human rights abuses and the 2018 brutal murder of U.S.-based, Saudi journalist Jamal Khashoggi. A U.S. intelligence report, declassified in 2021, found that the Saudi government approved the operation that led to Khashoggi’s capture and murder.
PGA Tour Commissioner Leave of Absence
In the meantime, Monahan is on a leave of absence to deal with an undisclosed medical situation.
In a statement issued late Tuesday, the PGA Tour Policy Board offered its full support to Monahan. The statement indicated that PGA Tour chief operating officer Ron Price, executive vice president, and president Tyler Dennis will take over the PGA Tour’s day-to-day operations.
