Golf took an unexpected hit in the new tax law. Will it cause lasting damage?

January 24, 2018

The afternoon of Nov. 2, 2017, Jay Karen’s email pinged with a message from the Washington lobbyist firm Forbes Tate Partners. Under the subject line “Entertainment Deductions,” the notice explained that the newly proposed tax bill held some bad news for golf: Starting in 2018, it would make client golf no longer deductible.

Well, this can’t be right, thought Karen, CEO of the National Golf Course Owners Association.

“It just seemed counterintuitive,” he recalls. “It’s a Republican Washington, D.C., and being inside golf, I knew golf was a legitimate business expense.”

As Karen read on, he began to process what was really happening. The law would eliminate the 50 percent deduction for most types of client-entertainment expenses, not just golf. Either way, this could be harmful to his membership, a group of private and public golf course owners. The NGCOA quickly connected with fellow members of We Are Golf – a coalition of industry members that includes the World Golf Foundation and the PGA of America, among others – and they began working on a plan to push back against the proposed change.

It didn’t work. On Dec. 22, President Trump signed the Tax Cuts and Jobs Act of 2017 into law, and the tax deduction for client golf was gone.

What will this mean for golf courses? Hard to know. Some owners and operators fear a sharp falloff in their businesses while others concede they have no idea how it will all play out. In the meantime, many in the industry are feeling stung by the move—and some are making plans to fight back.

“Personally, I’m disappointed,” says Linda Rogers, owner of the Juday Creek Golf Course in Granger, Ind. One of the things that gnaws at her most: Restaurant meals continue to be deductible business-entertainment expenses. “I’ve been in the restaurant industry myself, and I’m happy for them, but it’s kind of like [Congress] picked winners and losers. To me that just didn’t make sense.”

But then, she’s not totally surprised. A former National Golf Course Owners Association board president, Rogers would often travel to Washington as part of National Golf Day, an industry effort to educate lawmakers on the sport’s importance. “The people on Capitol Hill didn’t really look at golf like any other industry or business,” she recalls. “They thought of it more of as an elitist sport. They didn’t understand that 80 percent of golf is played at public facilities and only 20 percent at private clubs. Most are community hubs. We here at our facility host a lot of events and do a lot of charitable work that supports the community.”

Golf’s fight against the deductibility issue came as the industry was waging three other tax battles: making golf courses eligible for certain types of tax relief in the wake of natural disasters, allowing course owners to continue receiving tax breaks for donating part of their property as “conservation easements” and maintaining the PGA Tour, LPGA and PGA of America as tax-exempt organizations.


The lobbyist firm Forbes Tate “was able to handle the easement issue on our behalf, and they quietly took care of it,” says Steve Mona, CEO of the World Golf Foundation.

Jack Nicklaus and Davis Love III, among others, joined the successful effort to keep the tours tax-exempt. Nicklaus wrote letters and called senators, and Love even traveled to D.C. to meet with lawmakers.

The effort to keep client golf deductible lacked that sort of star power. We Are Golf reached out to a few members of Congress, including Sen. Johnny Isakson of Georgia, a former golf course owner. It also wrote a six-paragraph letter to the chairmen and ranking members of the Senate Finance and the House Ways and Means committees. The essence: It’s unfair to cut the business-entertainment deduction for golf but not meals, and this change will cause “reduced business activity” for the small business owners of golf courses.

They got no response.


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It was discouraging, says Karen of the golf course owners association. “There were no hearings on the bill, and it was passed as quickly as possible. Obviously, a lot of people in Washington wanted a tax-cut victory. If we’d had more time, we would have gathered more troops within the golf industry to influence it. Golf also could have taken the lead in organizing more entertainment industries to lobby against it.”

Would that have made any difference? Christa Bierma, a tax partner at the firm Ernst & Young, notes that cutting the entertainment deduction is projected to raise $21 billion. “That’s a significant revenue-raiser. So overcoming the hurdle of finding those dollars somewhere else would be difficult. In terms of optics, ‘We need more deductions for entertainment’ is a tough sell.”

Still, members of the golf industry say they haven’t given up the fight. “Because the process was so quick and so closed, and because this legislation is so sweeping, there’s going to be a process called technical correction where the unintended consequences of this legislation will be addressed,” Mona says. “We’ll have an opportunity to take another bite at the apple as it relates to the business-entertainment deduction and the disaster relief.”

(Tax experts are skeptical this will amount to much. “Generally I wouldn’t expect a one-off repeal to happen,” says Bill Conron, a partner at the accounting and consulting firm Citrin Cooperman. “It would have to be part of a larger package of reforms.”)

Until then, golf course owners and managers are hoping for the best. “We feel a round of golf with a client or potential client is pretty valuable, so we don’t think it’s going to have a drastic impact, like people will stop playing golf,” says Steve Skinner, CEO of KemperSports, which operates 125 courses throughout the U.S. and Latin America.

It’s worth remembering that business-entertainment expenses used to be 100 percent deductible before they fell to 80 percent in the 1980s and 50 percent in the 1990s, notes Brian Ray, a partner in the tax department at Hertzbach & Co.

Neither change destroyed golf — though some who were in the industry back then say they saw a difference. “It wasn’t a huge dropoff, but it was enough that it was noticeable,” says Rogers, recalling 1990s tax reform. “You could see it when you’d follow up with companies about corporate events. They’d say, ‘Well, we’re not doing that anymore.’ ”

She figures about 20-25 percent of her course’s business is corporate outings and events these days. You can probably guess what happens if that falls off sharply because of the new tax law. Says Rogers: “If all of a sudden that corporate business starts to go away, then what you’re faced with is raising prices for the recreational golfer.”