News & Opinion

Golf will take big hit with tax reform

When President Donald Trump signed a massive tax-reform package into law last month, pundits squared off to argue about winners and losers. Much of the discussion, like the partisan legislation itself, divided along party lines.

One unquestionable loser from the Tax Cuts and Jobs Act will be golf.

For a business that already has been assessed more than its share of penalty strokes in recent years, golf will be faced with an elimination of the 50-percent tax deduction for business expenses. That news follows a deduction that already had been halved during 1990s tax reform, when such business expenses had been fully deductible.

Regardless of golfers’ political-party affiliation, the fact that a president who owns and operates golf clubs signed the legislation into law Dec. 22 was no Christmas gift for a struggling industry and is rich only in irony.

Before the mid-1990s, individuals and businesses were allowed to deduct 100 percent of business expenses – club memberships, guest fees, entertainment, etc. – related to golf. Those deductions were cut to 50 percent, which devastated golf’s culture of business entertainment.

Linda Rogers, a candidate for the Indiana State Senate as a Republican from Granger, is a golf course owner and a former president of the National Golf Course Owners Association. She fears that the latest legislation will hurt the game at a time when many owners already are struggling to survive.

“When the business write-offs for golf were cut to 50 percent in the 1990s, that was the start of the decline of the golf business, in my opinion,” she said. “This new tax bill will really hurt golf.”

In the early 1990s, Legends Golf Club in Franklin, Ind., which my family owns and operates, hosted many pharmaceutical companies. They typically would invite a group of doctors for lunch, with a product presentation or some type of educational component as part of the program. Afterwards, the group would play golf, and the pharmaceutical company picked up the tab.

When the tax laws cut that allowable expense by 50 percent, the pharmaceutical business dried up on golf courses. The number of corporate golf outings also started to decline. Golf courses started taking hits on guest fees and corporate-sponsored memberships.     

Golf’s leaders must have been taking a long winter’s nap in the days leading up to Christmas. Trump signed legislation that no doubt will cost U.S. golf courses millions of dollars. This action by Trump, a single-digit handicap whose business empire includes 17 high-end golf courses on three continents, has left course owners and operators feeling like they just got dumped on by their best friend.

When contacted by Morning Read, Larry Glick, who as executive vice president for strategic development at the Trump Organization oversees the golf properties, declined comment, saying, “[I] can’t talk politics, unfortunately.”

Although business entertainment got hacked, business meals still will receive the 50 percent write-off. So, here’s a very likely scenario that will work against golf: Your local banker is a member of a private club that has a $200 guest fee. In the past, he would invite three guests to discuss business over a four-hour round of golf. Now with no tax incentives on the golf course, he probably will take those same three clients to a restaurant, buy several bottles of wine, appetizers and aged bone-in steaks. The banker will drop that same $600 at the restaurant because of the $300 he receives in a tax write-off.

Legitimate business expenses will be funneled away from golf and into other areas where deductions are allowed.

The ramifications of the Tax Cuts and Jobs Act has been a well-kept secret in the golf industry. The people in the golf trenches are the owners, operators and club officials. They are the ones responsible for the bottom lines and keeping their respective facilities open each day. Unfortunately, many are just emerging from the holidays and realizing the impact of this law.

Which leads to this question: Where were golf’s leaders when this bill was passed? Morning Read posed that question to Steve Mona, who is chief executive at the World Golf Foundation, which oversees We Are Golf, a coalition of golf’s leading organizations and the lobbying arm for golf legislation. Mona would not comment.

Jay Karen, the chief executive officer of the National Golf Course Owners Association, highlighted the “relationship-building and business value of golf” in an emailed response to Morning Read.

“No one has measured the scope of business golf spending, nor the behavioral changes that might occur with the removal of the deductibility,” Karen said. “Despite the chance for a negative impact, my hope is the effect will be marginal, at best.”

Golf’s leaders certainly were worried about protecting their organizations’ tax-exempt status as non-profits, and they succeeded, which leads me to believe they knew the intricacies of this legislation. 

So, what about everybody else in golf that is effected by the Tax Cuts and Jobs Act? We will await the answer to that question.  

Ted Bishop, who owns and operates The Legends Golf Club in Franklin, Ind., and is the author of “Unfriended,” was president of the PGA of America in 2013-14.; Twitter: @tedbishop38pga