Could The PGA Tour and LPGA Lose Non-Profit Status?
By Torleif Sorenson on 9/26/13
For most people, sports is a pleasant diversion from "the real world" and things like politics. But if U.S. Senator Tom Coburn (R-Oklahoma) gets his way, the two worlds are about to collide.

Sen. Coburn, a medical doctor who has been Oklahoma's junior senator since January 3, 2005, has introduced and sponsored S.1524, "The Properly Reducing Overexemptions for Sports Act." According to a copy of the source document, the bill seeks to do the following:
  • Remove statutory language from the tax code allowing "professional football leagues" to enjoy the same tax-exempt status as industry trade associations.

  • Amend the tax code to prohibit any professional sports organization substantially involved in running league affairs from qualifying as a 501(C)(6) tax-exempt trade association, typically used by industry organizations or chambers of commerce.

  • Define a major professional sports league as an organization with gross receipts over $10 million and involved with fostering sports competitions.
Last Wednesday, the bill was referred to the Senate Committee on Finance. The bill currently has no other sponsors.

If passed and signed into law as is, the bill would strip not only the National Football League of their 501(C)(6) status, but also the PGA Tour, the LPGA, and the PGA of America. Major League Baseball gave up its tax-exempt status some years ago, while the NBA has never had such status. The National Hockey League currently enjoys 501(C)(6) status, but has offices and operations in both the United States and Canada. The United States Olympic Committee (USOC) is a charitable 501(C)(3) organization and would not be affected.

In the summary of the bill, Sen. Coburn writes that "professional sports leagues are not traditional trade associations the same way the U.S. Chamber of Commerce is. Leagues claim their main purpose is to promote their respective sports, but most of their activities are dedicated to specific brands that help a limited number of pro players."

However, the PGA of America is the nation's largest group of teaching professionals, whose mission chiefly involves teaching the game and helping to expand participation. Whether or not this fact could conceivably help the PGA of America avoid the loss of exemption might apply to one of the sample questions in the bill summary:
Q: Will this impact the teaching certification or charitable activities of a professional sports league?

A: No. Most leagues already have their own 501(C)(3) charitable organizations through which they donate to communities. Leagues and associations will also be able to spin off any teaching certifications operations into separate 501(C)(6) organiziatons focused on those activities, since they are not related to fostering professional sports competitions.
To say that S.1524 might open a gigantic "can of worms" is an understatement.

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