Will The PGA TOUR and LPGA Lose Their Tax Exempt Status?

Congresscritters don’t have anything better to do, so one of them—Senator Tom Coburn (R-Okla.) has introduced a bill to strip sports leagues of their tax exempt status.

Here’s what the Coburn report says:

The PRO Sports Act is currently being scored by the Joint Committee on Taxation. Simply taxing PGA Tour’s $1.4 billion of revenue alone at the 35 percent corporate tax rate would yield an estimated $300 million in federal revenue. It is uncertain exactly how the leagues would change their structures were their exemption revoked. However, these leagues clearly do not need subsidies through this exemption, which amounts to a tax expenditure.

In his annual report on government pork, Coburn writes:

The National Football League (NFL), the National Hockey League (NHL), and the Professional Golfers’ Association (PGA) classify themselves as non-profit organizations to exempt themselves from federal income taxes on earnings. Smaller sports leagues, such as the National Lacrosse League, are also using the tax status. Taxpayers may be losing at least $91 million subsidizing these tax loopholes for professional sports leagues that generate billions of dollars annually in profits.28 Taxpayers should not be asked to subsidize sports organizations already benefiting widely from willing fans and turning a profit, while claiming to be non-profit organizations.

The bill would apply to any sports league with more than $10 million in annual revenues. That includes the National Football League, National Hockey League, Professional Golfers Association, Association of Tennis Professionals Tour, Women’s Tennis Association Tour, U.S. Tennis Association, National Hot Rod Association and the Professional Rodeo Cowboys Association. Major League Baseball is not currently a tax exempt entity, having become a for-profit, limited liability corporation in 2007. MLB claims the switch was revenue neutral.

Curiously, Alex Micelli of GolfWeek got this completely wrong. He said that the bill would ” tax loophole that is worth approximately $10 million a year to the major pro sports leagues.” Apparently, Miceli didn’t actually read the report or understand what it said. The $10 million refers to annual revenues, Alex.