Having railed against his predecessor for playing too much golf, President Trump has gone on to peg it at a greater clip than anyone who ever held the Oval Office. That’s one golf-related irony of his administration.
Here’s another: The president has now signed tax legislation that may make golfers think twice before they schedule their next round with a client.
Embedded in the recently approved tax reform bill is a provision that eliminates a 50 percent deduction for business-related entertainment expenses. It applies to a range of activities, including concerts, sporting events and, yes, rounds of golf.
After posting your score for 18 holes with a business acquaintance, you can no longer write off half the cost of the round. (You will, however, still be able to deduct half the cost of dinner with that client; under the new tax code, write-offs on business meals have not been touched.) [image:14034870]
Though it’s hard to put a number on the economic impact this will have the game, the change is far from welcome news for an industry up against its share of struggles, from course closures to flat-lining participation.
“I doubt it will impact the high-end of the business world like guys playing at Augusta or Pine Valley, but it will definitely cause more scrutiny of corporate outings and probably force people who mix golf and business to better justify a day outside,” said David Rynecki, CEO of the independent research firm Blue Heron Research Partners and author of Deals on the Green: Lessons on Business and Golf from America’s Top Executives. “Consider that you just saw the cost of [business] golf double.”
To many in the golf world, the new rule is disappointing, but not surprising. Jay Karen, CEO of the National Golf Course Owners Association, was among those who saw it coming. In late November, as the tax bill was taking shape, Karen and representatives from three other golf industry groups penned a letter to Congress, pleading with lawmakers to preserve the 50 percent business-entertainment deduction. Doing away with it, they wrote, would hurt “small business owners of golf courses across the country” while dampening the myriad business dealings that take place “every day of the week across thousands of courses.”
Theirs was not the only golf-related lobbying going on. At about the same time, the PGA Tour was also throwing around its political mite, albeit regarding a different matter. Its actions came in response to an early version of the tax bill, which contained a subsection that would have jeopardized the PGA Tour’s tax-exempt status as a 501(c) (3) charitable organization. When the Tour got word of the proposed change, Tour commissioner Jay Monahan phoned Jack Nicklaus to enlist his help. Nicklaus called and wrote letters to members of Congress, as did Davis Love III, who also met in person with members of the Senate Finance Committee. The provision in question wound up being removed.
Like the Rules of Golf, the tax bill is a dense piece of legislation, parts of which are favorable to the some of the game’s more powerful interests. One provision the new law preserves, for instance, is a loophole that allows course owners to claim deductions on land set aside for conservation. Originally intended to encourage conservation of agricultural land, the write-off has been a boon to developers and course owners, including President Trump, who, according to a 2016 Wall Street Journal report, deducted $39.1 million from his 2005 federal income taxes by promising not to build homes on Trump National Golf Club in New Jersey.
The business entertainment write-off covers different ground. It has implications not only for course owners but also for golfers across the economic strata. That’s an important point, says Karen, who sees the rules change as an outgrowth of a stubborn misperception of golf as monolithic, played mostly by corporate bigwigs at private hideaways and luxury resorts. The truth, Karen notes, is that 80 percent of rounds in United States are played on public courses, and the average greens fee paid is $37.
“I equate us to the restaurant industry,” he said. “We have the highest end and we have the greasy spoons. But we constantly have to try to stay ahead of misperceptions. That includes working hard to remind Congress who we really are.”
The rationale behind the law was to close a perceived loophole. But in doing so, Karen said, lawmakers have unfairly lumped golf in a category with other forms of entertainment that aren’t as conducive to doing legitimate business.
“There’s entertainment where you’re basically just buttering up a client,” Karen said. “But that’s not what happens on a golf course. Spending an afternoon on the course with someone is very different from going to a concert, where you’re not really conducting business because, let’s be honest, you can’t even hear.”
Deals on the Green author Rynecki agrees. “For those of us trying to build relationships, golf is probably the biggest or at least the best form of business-related entertainment,” he said. “Actually, it’s really less entertainment, though the IRS might think it is, than it is having a walking meeting that involves discussing specifics but also getting to know another person, whether a potential hire, a client or a customer.”
That makes golf a powerful transactional pursuit, as the president appears to understand.
In response to recent criticism over the amount of time Trump has been spending on the course, White House spokesperson Sarah Huckabee Sanders pointed to the upside: The game has given him a chance to build relationships, she said, which, in turn, has helped him get his agenda passed.