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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 fans and players 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 McIlroy has been the most outspoken about his disdain for the LIV.

The four-time Major winner made headlines during the 2023 Genesis Scottish Open when he said, "If LIV Golf were the last place to play golf on earth, I would retire. That's how I feel about it."

In light of recent comments 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.

Senator Ron Wyden's Statements

Senator Wyden, the Senate Finance Committee chairman, 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 lawmakers must understand what risks this arrangement may pose to America's national interests, particularly concerning 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 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 is tax-exempt 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 would modify the tax code's 501(c)(6) designation 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 benefits funds belonging to countries with more than $100 billion invested globally.

Corporate Tax Implications

Should the merger occur, the resulting organization may face significant changes regarding its taxes based on several 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 in the United States and internationally.

The proposed PGA-LIV merger could significantly impact the taxes the new organization must 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.

This article will share updates as this situation continues to evolve.

What do you think about the possible merger of the PGA with LIV?

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