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What You Should Know About Potential Tax Implications of the PGA-LIV Merger
The proposed merger between the Professional Golfers' Association (PGA) and Live! Inc. (LIV) has generated significant attention. Last year, numerous former PGA Tour players, like Phil Mickelson, Bubba Watson, Dustin Johnson, and Brooks Koepka, left the PGA to compete in LIV events.
The move caused a massive divide in the golf world, with both fans and players who remain aligned with the PGA speaking out against the Saudi Arabian-owned enterprise. Among the players who stayed with the PGA, including Rickie Fowler, Jordan Spieth, and Justin Thomas, Northern Irishman Rory McIroy has been the most outspoken about his disdain for the LIV as a whole.
The four-time Major winner made headlines during the 2023 Genesis Scottish Open when he said, "If LIV Golf was the last place to play golf on earth I would retire. That's how I feel about it.”
In the light of recent comments made by Oregon Senator Ron Wyden (D), a prominent figure in tax legislation, this guide aims to clarify some of the tax issues surrounding the potential golf merger. Bear in mind, however, that there is an ongoing Department of Justice investigation into the legality of the PGA-LIV pact.
Bubba Watson: Tom Dulat / Getty Images Sport via Getty Images
Senator Ron Wyden's Statements
Senator Wyden, chairman of the Senate Finance Committee, is frequently involved in tax legislation. In June of this year, Wyden launched a probe into the golf merger amid concerns about the resulting entity’s tax-exempt status in the United States.
In a memo, Wyden wrote, “I believe it is critical that lawmakers understand what risks this arrangement may pose to America’s national interests, particularly with respect to foreign investment in U.S. real estate, such as locations neighboring military facilities or sensitive manufacturing centers, and how you plan to mitigate those risks.”
Additionally, he shared that he believes, "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.”
Under current law, the PGA Tour enjoys tax-exempt status as a 501(c)(6) organization. After the pending merger of the PGA and the Saudi Public Investment Fund (PIF) caught Wyden’s attention, he introduced the following legislation:
The Sports League Tax-Exempt Status Limitation Act, which would modify the 501(c)(6) designation in the tax code to exclude sports organizations with assets exceeding $500 million. Both the PGA and PIF have assets exceeding $500 million.
The Ending Tax Breaks for Massive Sovereign Wealth Funds Act would deny the current law exemption from a 30% withholding tax that benefit to funds belonging to countries that have more than $100 billion invested globally
Stuart Franklin / Getty Images Sport via Getty Images
Corporate Tax Implications
Should the merger occur, the resulting organization may face significant changes regarding its taxes based on a number of factors, including Wyden’s proposed legislation and the following issues:
Taxation on Corporate Income: The combined entity will likely experience changes in its taxable income due to adjustments in deductions, credits, and expenses. Due to this, the group’s overall corporate tax liability could shift.
Tax Credits and Incentives: Depending on the structure of the possible merger, the new entity may be eligible for certain tax credits and incentives offered by relevant jurisdictions both in the United States and internationally.
The proposed PGA-LIV merger could significantly impact the taxes that the new organization needs to pay, both in the United States and internationally. Corporations, employees, and stakeholders involved in the merger should take proactive steps to understand any potential tax implications they may face.
Sen. Ron Wyden: Anna Moneymaker / Getty Images News via Getty
As this situation continues to evolve, updates will be shared in this article.
What do you think about the possible merger of the PGA with LIV?
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