By: Sam William Kuper

“Saudi Arabia’s sovereign wealth fund” is not a collection of words typically linked to tax-exempt nonprofits. However, that is exactly who stands to benefit from the century-old 501(c)6 Internal Revenue Code when the PGA Tour and LIV Golf complete their tentative agreement to merge in 2024. But is this merger and the PGA Tour’s planned continued use of its tax exemption as necessarily bad—or even evil—as many politicians are saying they will be?

Money Talks

Led by Chairman Crown Prince Mohammed Bin Salman (de facto leader of Saudi Arabia) and Governor Yassir Al-Rumayyan (former chairman of Saudi Arabia’s national oil company, Aramco), Saudi Arabia’s Public Investment Fund (“PIF”) has over $700 billion USD in assets and is seen as a cornerstone for the development of Saudi Arabia’s Vision 2030 project. Starting in 2014, PIF began investing and reaching beyond Saudi Arabia’s borders to extend its influence and investment opportunities. From stakes in Silicon Valley sweethearts Uber and WeWork(oof) to video game icons Electronic Arts and Activision Blizzard, PIF has become an investment hegemon. Its next goal? Dominating international sports.

Coined “sportswashing,” PIF has used its immense wealth to insert itself into the world’s most popular sports in an attempt to bolster its reputation and hide from Saudi Arabia’s awful human rights record. They bought a middling Premier League soccer team and infused it with cash. They backed Formula One races in Saudi Arabia, headlined by post-race concerts from Travis Scott, Charlie Puth, and Calvin Harris. PIF’s crown jewel, however, was its introduction of LIV Golf in October of 2021.

(Don’t) Pay for Play

For the better part of a century, the PGA Tour has been the preeminent golf league in the world. In 2021, it hosted 113 tournaments in 36 U.S. states and 10 countries, with about 200 golfers competing for $765 million in prize money. It generated over $1.59 billion in revenue and paid executives over $30 million—with Commissioner Jay Monahan raking in $13 million. The catch? They have been a 501 (c)6 tax-exempt nonprofit since 1977.

Initially enacted within the 1913 Tariff Act, 501(c)6 organizations (in comparison to 501(c)3) are organizations that share a common business interest. Their purpose is to promote that interest for the benefit of their members, and “not to engage in a regular business of a kind ordinarily carried on for profit.” In return, they must publicly file a 990 form disclosing their finances—including their sources of funding, charitable donations, and payments to executives.

The PGA Tour was not alone in claiming this exception amongst its peers. In 1966, the Tariff Act was amended to include “football leagues” when the National Football League (NFL) merged with a competitor. Major League Baseball (MLB) and the National Hockey League (NHL) also claimed nonprofit status in the decades following. But while the MLB, NHL, and NFL have all discarded their non-profit status in recent years, the PGA Tour has remained steadfast—mostly because their players are individual contractors and not member teams who make their own profits from ticket sales, merchandise, etc.

By co-sponsoring tournaments with 501(c)3 charities (such as the FedeEx St. Jude Classic), the PGA Tour provides a platform for raising money. However, a 2013 ESPN report flamed the PGA Tour for donating just 16% of its revenue from tournaments on average to charities—the industry standard is 65%—and in one case, caused a charity to lose money.

Pitching the Wedge

Documents prepared for PIF by Mckinsey & Company—known to hold authoritarian governments as clients—advised that LIV needed to lure the top 12 players in the world from the PGA Tour to be profitable. They managed four. Nicknamed “Project Wedge,” LIV’s launch was met with expected criticism. Signing stars like Phil Michelson, Dustin Johnson, and Bryson DeChambeau to massive contracts, the PGA immediately banned them from future Tour events. Commissioner Monahan publicly admonished these players, saying that he “would ask any player that has left, or any player that would consider leaving, ‘have you ever had to apologize for being a member of the PGA Tour?’” In its first season, LIV spent $784 million on 8 events. Their revenue was “virtually zero.”

But despite LIV’s flop, they persisted—and the golf world was thrown into further chaos. The 11 banned golfers sued the PGA Tour for antitrust violations and the PGA counterclaimed for tortious interference. The Justice Department launched its own antitrust investigation into professional golf. But in May of 2023, over breakfast near Palazzo Ducale in Venice, Monahan and Al-Rumayyan came to terms with what, in hindsight, was likely inevitable.

Big Beautiful Deal

The announced agreement, described by former President Trump as “big, beautiful, and glamourous,” would combine the European Tour, LIV Golf, and the PGA Tour into one, new for-profit entity that would control the PGA’s commercial rights. The PGA Tour would retain its nonprofit status and control over how tournaments are played. LIV would reserve the exclusive right to invest in the company. Al-Ramyan would be the Chairman. All lawsuits would be dropped. Almost immediately, two Senate committees launched investigations into the merger so they could assess the “risks associated with a foreign government’s investment in American cultural institutions, and the implications of this planned agreement on professional golf in the United States going forward.”

“Golf is a sport in which players call penalties on themselves, whether an infraction is visible to others or not” – PGA Tour mission statement

“Any hypocrisy I have to own.” Jay Monahan, in walking back his initial comments about players leaving for LIV, reiterated that he felt like the merger was best for golf. But it is without a doubt problematic. From Saudi Arabia’s connection to 9/11 to the 2018 killing of Washington Post journalist Jamaal Kashoggi, there is no good way to frame Saudi involvement in American sport.

But here are the facts. The PGA Tour has raised $3.6 billion for charitable donations since 1938, and $1.6 billion since 2014. In 2021, it generated $173 million, or about 12% of total revenue—just 8 million away from cracking the top 100 of the most charitable organizations in the U.S. The NFL Foundation, in contrast, gave away $70 million in 2022, or about .5% of the NFL’s total revenue. Patagonia, who was widely praised for shifting ownership to a nonprofit and dedicating 100% of its profits to environmental causes, still gives away only about 6.6% of its revenue.

We still do not know much about the details of the merger or the future of the PGA Tour as a nonprofit. But if the PGA Tour either decides or is forced to give up its nonprofit status, it will no longer be required to publicly disclose its finances. With Al-Rumayyan serving as the chairman for the new joint entity, and PIF’s reputation for a lack of transparency, this would likely not be an optimal outcome.

Saudi Arabian investment in American culture is not coming—it is already here. But its benefits here of providing consistent wages for all professional golfers, making the game more available across the globe, and ultimately raising more money for charities, may be worth it. We should push for clarity, disclosure, and charitable giving when we can, in whatever form that may take.