Congress has slowly been turning up the heat on the nation’s Big Tech companies, which have played it cool—until now. Signaling that perhaps bipartisanship isn’t dead, the Senate Judiciary Committee passed the “American Innovation and Choice Online Act” by a lopsided vote of 16-6. The bill would prevent tech companies from giving their own products preferential treatment and is the latest in a series of measures that attempts to rein in their market power.
Although Big Tech might be getting a little warm under the collar, the reality is lawmakers have been chasing their tail for years on this to no avail. Meanwhile, professional sports have, for the most part, escaped the same level of congressional heat despite desperately needing reforms themselves—none more so than the PGA Tour.
As anyone who has shelled out $90 for a golf shirt or $45 for a hat at one of its tournaments can easily tell you, the PGA Tour is about making money. So, it will come as a surprise that the Tour is a nonprofit organization—at least on its tax forms. The PGA Tour is registered with the Internal Revenue Service (IRS) as a business league, which is defined under Section 501(c) (6) as “an association of persons having some common business interest, the purpose of which is to promote such common interest.” The business league registration allows the organization to claim nonprofit status.
Significantly, a 501(c)(6) organization can claim exemption from federal and state taxes. The PGA Tour does so with impunity. An investigation by ESPN’s “Outside the Lines” several years ago found the Tour had avoided $200 million in federal taxes over two decades. And while it takes every opportunity to publicize charitable efforts, the same investigation found the PGA Tour didn’t quite back up its boasting, spending on average around 16 percent of tournament revenue on charity. Meanwhile, PGA Tour executives are raking in lucrative salaries.
Over the years, Congress has toyed with revoking the PGA Tour’s tax-exempt status. Former Oklahoma Sen. Tom Coburn introduced legislation that would have stripped not only the organization of its tax exemption status but the NFL and NHL as well. At the time, Coburn noted the PGA Tour stood out above the others because it took “the largest advantage” of the tax exemption. More recently, the Senate version of the “Tax Cuts and Jobs Act” contained a provision revoking the tax-exempt status, but it failed to make it into the final bill.
Perhaps the time has come for Congress to take a fresh look at this “nonprofit.”
The Big Tech companies—Google, Apple, and Meta (formerly Facebook)—are not only feeling the anti-trust heat from Congress, but also from states and the federal government. If their actions warrant such attention, then so do those of the PGA Tour. The organization is the dominant force in the golf world, flexing its muscles at any hint of competition and tightening its grip on players, which directly conflicts with its non-profit mission of promoting the interests of professional golf and golfers. The recent controversy over PGA Tour players’ plan to participate in the Saudi International, an Asian Tour event, was the perfect opportunity to do both.
The PGA Tour prohibits players from playing in other golf tournaments that take place the same weekend as a Tour event. Not surprisingly, the Tour holds tournaments almost every week of the year. The only way a player can play in a competing event is to request a written release from Tour officials, as many players did for the Saudi International. The PGA Tour initially indicated it would refuse to grant releases and threatened fines or even lifetime bans for those who played without a release. Ultimately, the Tour reversed course and issued one-time releases—with conditions. The memo accompanying the decision reasserted the Tour’s power to deny future requests and detailed the potential reasons, including if it “would otherwise significantly and unreasonably harm the PGA Tour and its partners.”
Faced with an aging fanbase and sinking television ratings, the PGA Tour is ferociously defending its golf kingdom against rising insurgents. However, it may have run afoul of the Sherman Antitrust Act which prohibits activities that restrict marketplace competition. The organization essentially has veto power over where and when players play golf, citing among other vague reasons, unreasonable harm to the PGA Tour. How exactly Dustin Johnson or Phil Mickelson playing in another tournament—even in conflict with a PGA event—causes harm is anybody’s guess. As is what type of harm. The more likely explanation is the PGA Tour simply wants to squash the competition to protect its bottom line, and prohibiting marquee players from participating in non-tour events is one way to go about it.
While Big Tech makes a more alluring target, holding the PGA Tour’s feet to fire would be worth Congress’s time.
