With the surprise merger between the PGA Tour and the Saudi Public Investment Fund (PIF) pending, Senate Finance Committee Chairman Ron Wyden, Democrat of Oregon, on June 26 introduced legislation that would revoke the PGA Tour’s tax exemption and deem the PIF ineligible for a lucrative tax break that applies to sovereign wealth funds.
“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,” Wyden said. “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.”
Under current law, the PGA Tour enjoys tax-exempt status as a 501(c)(6) organization, which provides tax exemptions for “business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues.” (Major League Baseball and the National Football League voluntarily gave up their Code Sec. 501(c)(6) tax exemptions in 2007 and 2015, respectively.)
Measuring by total revenues, the PGA Tour is by far the largest sports organization with a 501(c)(6) designation.
Wyden’s first bill, The Sports League Tax-Exempt Status Limitation Act, would modify the 501(c)(6) designation in the tax code to exclude sports organizations with assets exceeding $500 million.
Wyden’s second bill is called The Ending Tax Breaks for Massive Sovereign Wealth Funds Act. Current law exempts sovereign wealth funds and similar foreign government investment funds from a 30% withholding tax on payments such as dividends and interest. Sovereign wealth funds can structure income and transactions such as the PGA deal to maximize tax-free profits.
The Ending Tax Breaks for Massive Sovereign Wealth Funds Act would deny that benefit to funds belonging to countries that have more than $100 billion invested globally. An exception would apply to countries that have a free trade agreement or a tax treaty with the U.S. and are not deemed by the State Department a “foreign country of concern.” Based on public sources, the countries that are expected to be made ineligible for the tax break are Saudi Arabia, Russia, China, Qatar, the United Arab Emirates, and Kuwait.
Wyden opened an investigation in June into the PGA-PIF deal’s financial structure and implications for censorship and national security, given the PGA’s extensive real estate holdings near U.S. military sites. That investigation is ongoing. Wyden and Senator Elizabeth Warren, Democrat of Massachusetts, also called on the Justice Department to scrutinize the deal for potential antitrust violations.
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