[John Moore II]

Overall, I think these clubs in America simply do not want to lose exclusiveness by allowing outside play on the course. There is, to me, a certain mystique about Augusta National, Pine Valley and Cypress Point that simply would not be there if all those courses were open to the public.

[Patrick_Mucci]

I'm not familiar with the guest/visitor history of any of the clubs you mention.  Are you stating that NONE of them ever had a problem associated with outside play ?

No, I'm not.  Where did you get that idea?  What I'm suggesting is that allowing visitors hasn't been the downfall of these august clubs - otherwise they wouldn't persist with such policies.

Chris,

How many times must you be reminded of the enormous difference in the legal, Tax and governmental environment those clubs operate in versus clubs in the U.S. ?

What's also gone unmentioned are the liability issues.
Why would a club want to subject itself to those problems ?

As a member, why would you want to expose the club to those issues and problems.

Why would you want to curtail your enjoyment of the club, something you pay dearly for, in favor of perfect strangers who would pay a nominal fee ?

And, $ 400 or $ 500 is a nominal fee compared to the initiation, dues and assessments paid on an annual basis by members.

[Patrick_Mucci]

Firstly, I believe that private clubs have every right to be just that, private, and make whatever rules they want.  

But, where it gets tricky for me is what is truly a "private" club, and what are the tax exempt benefits for being not-for-profit private in the totally exclusive sense.  

By what specially situated status do they get to buy land, take it off tax rolls, receive public permitting to do things to the land, then promulgate a totally exclusive atmosphere to be arbitrary and capricious in who they allow to use the facility that uses public resourses of water, and other environmental impacts that in one way or the other effect the outside community at large?

RJ,

You're completely uninformed.

Private clubs are NOT off the tax rolls.
Where did you get that notion ?

They pay Real Estate taxes like everyone else.
They pay Sales taxes like everyone else.
They pay State and Federal taxes related to employee wages.
They pay for their water, electricity, gasoline and every other usable commodity.

You're way off base on this issue.[/color]

There are a variety of equity and non-equity private clubs, with many sub-variations and structure within these different equity and non, examples.  I don't pretend to know the subject enough to really make any definitive comments on their structures... maybe Jeff G., does.  

Then you shouldn't make erroneous broad based statements related to private clubs and taxation.[/color]

But, I ask about the example of Sebonack (or perhaps it could be Riviera or Cypress Pt).

Take Sebonack; it was developed by Mr P.  He is said to have paid 41 mill just for the land, lord knows how much for the design/construction.  He 'sells' or 'offers' memberships to an exclusive group for a million initiation fee that I assume he approves or declines these memberships.  Then he relieves the members of some princely yearly fees.  If it is non-equity, I assume that if the member leaves they get some or all the million back, right?  If it is equity, does he retain deed and title to the course and facilities and still retain the right to tell you if you don't please him that you are no longer a member?  What do the members of equity actually own if one guy can rule the roost?  If it is equity, then can't the members by some sort of majority vote decide what their privacy policies and guest play should be, after considering tax consequences and such?  I understand the Japanese guy that "owns" Riviera makes the rules and even decides who gets to remodel the course, etc.  What do the members get for their yearly fee, the right to pay again next year?  


RJ,

I have news for you.  Mike Pascucci isn't putting a gun to anyone's head and forcing them to join.

I have addtional news for you.  All of the PROSPECTIVE members are keenly aware of the lay of the land, the rules and their rights BEFORE they ELECT to join.

They've agreed to EVERY facet of how Mike chooses to run the club.
And, if they don't like it, the exit door is perpetually open for them.[/color]

I'm more interested in what the members get in these various situations, and how much control of the actual deeds and titles to the land and facilities these mega founder/developers get to retain, and how that all plays out on the "PRIVELEGE" granted by the government for them to do all these things and NOT PAY TAXES as a not-for-profit.  

The members get what they bargained for.   In "good faith" I might add.

Let me fill you in on another misconception you're laboring under.
As stated above, all of these clubs you're referencing PAY their taxes.

I'd like you to identify clubs that run at a profit.
I don't know of any, but, then again, I only have limited, specific knowledge on that topic.

There's a reason that clubs have assessments.
It's because they operated at a loss for the year.[/color]
 
What do the rest of the taxpayer citizens get for granting this non taxable privelege to a private developer/owner/club mogul like Mr P or others so situated?

What NON-TAXABLE privilege are you talking about.
You're dead wrong on this issue, Clubs PAY TAXES.
Where did you come up with the idea that they don't ? [/color]

[Chris Kane]

How many times must you be reminded of the enormous difference in the legal, Tax and governmental environment those clubs operate in versus clubs in the U.S. ?

I don't think I've ever been reminded of the "enormous difference in the legal, Tax and governmental environment those clubs operate in versus clubs in the U.S. ?"  That had nothing to do with my point, which was a specific response  to your "quality control" argument.

You are out of control.

What's also gone unmentioned are the liability issues.
Why would a club want to subject itself to those problems ?

As a member, why would you want to expose the club to those issues and problems.

No I wouldn't, but this has absolutely no relevance to any point I've made on this thread

Why would you want to curtail your enjoyment of the club, something you pay dearly for, in favor of perfect strangers who would pay a nominal fee ?

So the members of Prestwick, Muirfield, Royal Melbourne, Royal St Georges, Walton Heath and Hoylake have their enjoyment "curtailed" by allowing visitors a couple of days per week?  I'd be interested to hear what they have to say about that.

[Bob_Huntley]

Chris,

As someone who belongs to clubs in the US, Europe and Africa you need to know one thing.

Anywhere but in the US,  golfers, no matter the prestige of their membership of choice, do like their golf to be cheap. I know of a couple of exceptions but the Clubs LOVE the funds contributed by unaccompanied guests. This is not the case here.


Bob

[Mark Chaplin]

RStG have tee times fo non-members often off the 10th tee and outside of "peak" member hours. They even allow 3 and 4 balls on a Tuesday to cater for visitor demand. The HCEG allow visitors on 2 days a week, I cannot imagine the members are caused too much inconvenience.
Sunningdale allows visitors and corporate golf Mon-Thursday, I guess there is always a course available to the members.

Everything is horses for courses, some US clubs charge more in monthly dues than a few UK clubs charge their members for a years golf. However visitors not only pay greenfees but also spend money in the bar and restaurant, US clubs clearly have minimum spends to enable a full service to take place.

I guess my membership and total spend at my club last year was around £2000 that includes all golf, food, bar bills, summer ball for 2, etc. My initiation in 1999 was £250. We have reciprocal arrangements with 25 clubs around the world including several world top 100 venues and enjoy limited local reciprocal arrangements with some very fine clubs when we are closed for events. All in all I believe my membership gives me fantastic value for money.

Could I get the same stateside for under $10 000 a year at a US top 50 club? I guess in the UK we are used to paying considerably less for club life.

[Tom Birkert]

Chris,

As someone who belongs to clubs in the US, Europe and Africa you need to know one thing.

Anywhere but in the US,  golfers, no matter the prestige of their membership of choice, do like their golf to be cheap. I know of a couple of exceptions but the Clubs LOVE the funds contributed by unaccompanied guests. This is not the case here.


Bob

I'd have to agree with this - I also think this enables more people to become Members at clubs as the joining fees and annual subs are - generally - more affordable than to comparable clubs in the US.

Personally, I have no problem with limited and controlled visitor play. I've benefitted from it and have also occasionally suffered from it. I've only ever lived in the UK so I'm used to our system.

I would also much rather play with a Member as you get their insight and often stories about the course and club, and it's always nice to meet new people who have a shared passion.

[Mark_F]

So the members of Prestwick, Muirfield, Royal Melbourne, Royal St Georges, Walton Heath and Hoylake have their enjoyment "curtailed" by allowing visitors a couple of days per week?  I'd be interested to hear what they have to say about that

I imagine that they do.  My enjoyment of my club was curtailed in numerous ways by allowing outside, unaccompanied guests.

I would think the corporate days held at RM and other Sandbelt clubs aggavate members who may want to play on those particular days. I had access to one through a place I worked when I was at University, and it seemed that every time I wanted to play, I couldn't, because there was a corporate day.

It is just that in the UK and Australia, the members are prepared to suffer a little inconvenience for having cheaper subs. Not so in the USA, for which the members are willing to pay for their privacy, much like I was at St Andrews Beach, which was supposed to have NO play unless accompanied by a member. 

[Mark Chaplin]

Tom makes a very good point. The experience of playing with a member can enhance you visit 10 fold if they have a passion for the club. Secretaries or the pro will often put if asked a lone visitor with a member (although understandably you will not get signed in).

[Patrick_Mucci]

Chris Kane,

I responded, directly below each one, to the points you made in your post.

The relevance is apparent, you're just blind to it.

As to the curtailed enjoyment, that question was answered with clarity, wasn't it.

[Kirk Gill]

Forgive my ignorance of American tax law, but what is the history behind the tax exemption for private clubs? What is the reasoning behind this exemption? I'm sure the exemption isn't just for golf clubs, yes? What other kinds of clubs receive this exemption?

I don't have an agenda with this - it's just normal ignorance.

Thanks in advance for any help on this.

[Patrick_Mucci]

Forgive my ignorance of American tax law, but what is the history behind the tax exemption for private clubs? What is the reasoning behind this exemption? I'm sure the exemption isn't just for golf clubs, yes? What other kinds of clubs receive this exemption?

I don't have an agenda with this - it's just normal ignorance.

Thanks in advance for any help on this.

Kirk,

Look up IRS section 501 (c) and it will explain the nature of the income tax exemption.  Sections 503 and 505 expand upon the issue.

501 (c) (3) and 501 (c) (7) are probably the most pertinent.

[John Moore II]

Private clubs are not-for-profit organizations, therefore, the money they take in is supposedly only for operating expenses. This is the same with an organization such as the USGA or something like the Salvation Army. There is no tax paid because there is no income to be taxed. The property and such is still taxed at the going rate. If clubs allowed outside play, they may begin to fall into the category of for-profit, since they are not using outside money to cover expenses. (How Augusta National works with the coffers of money they get each year from the Masters, I am not sure. But ANGC is not-for-profit)

[Kirk Gill]

If clubs allowed outside play, they may begin to fall into the category of for-profit, since they are not using outside money to cover expenses.

Thank you, gentlemen.

The question that arises then is, what if a club is having trouble meeting expenses with a diminished membership? Would they be allowed to have limited public play to cover needed expenses? What about a restoration or renovation? Or is that a slippery slope?

[TEPaul]

"What on earth makes the PRIVATE clubs in the US so special that they don't take visitors groups?"

Dean:

I'm not sure I understand that remark. Why are you assuming that private clubs are special or think they're special simply because they prefer not to take visitors not sponsored or invited by members?  Or are you implying that some golf courses that are private that most of the world thinks are special courses and special architecture have some moral responsibility to share the course with the rest of the world simply because much of the world thinks it's special?

[Patrick_Mucci]

If clubs allowed outside play, they may begin to fall into the category of for-profit, since they are not using outside money to cover expenses.

Thank you, gentlemen.

The question that arises then is, what if a club is having trouble meeting expenses with a diminished membership?

Would they be allowed to have limited public play to cover needed expenses?

Yes, but, it's not an attractive alternative and if they did, it could change their tax status AND their "strictly private" categorization, opening them up to public interest laws.[/color]

What about a restoration or renovation? Or is that a slippery slope?

If a club was short on funds for operations, it would be difficult to imagine that they had a large capital reserve fund for restoration or renovation.
And, I would imagine that they'd be hard pressed to assess the members for the cost of such a project.  It's been done, but, it's painful.[/color]

[Scott Szabo]

If clubs allowed outside play, they may begin to fall into the category of for-profit, since they are not using outside money to cover expenses.

Thank you, gentlemen.

The question that arises then is, what if a club is having trouble meeting expenses with a diminished membership? Would they be allowed to have limited public play to cover needed expenses? What about a restoration or renovation? Or is that a slippery slope?

Kirk,

Most non-profit clubs are allowed some non-member income, which is called unrelated business income.  They are taxed if this non-member income exceeds 15% of gross income, and their tax-exempt status can be revoked.

Sadly, my club has experienced this scenario you speak of with diminshing membership over the past few years, to the point where we can no longer continue under the current structure.  We are in the process of restructuring our club to a for-profit entity, with some public play being allowed, along with opening up the dining facility to the public.  It's a sad road to go down, but unfortunately, we don't have any other way.

Scott

[Patrick_Mucci]

Scott,

I see that scenario as a possibility at a good number of clubs.

One of the things that disturbs me the most is the perpetuation of the status quo when the utilization patterns, cultural values and demographics dramatically changed over the years. 

Yet, club leaderships continued to do things as they had in the past with little or no effort to react and respond appropriately and responsibly to these new forces.

[TEPaul]

"If clubs allowed outside play, they may begin to fall into the category of for-profit, since they are not using outside money to cover expenses. (How Augusta National works with the coffers of money they get each year from the Masters, I am not sure. But ANGC is not-for-profit)"

J Kenneth:

I think what you must have meant to say is clubs that use too much outside money to cover expenses no longer maintain their status as "not for profit" and can consequently lose their "private" status.

With ANGC and The Masters, the fact is they are two separate legal entities and the monies derived from the Masters tournament may not excessively flow into and inure to the benefit of the members of ANGC exclusively. The Masters Tournament entity is a separate charitable entity.

I guess what some on here who are wondering about an American private club's ability to restrict outside non-member play need to appreciate is the US Constitution's "Right to Freedom of Association".

What that means in effect is if a club agrees to operate under various restrictions they are legally allowed to keep anyone out of their club that they choose.
 

[Scott Szabo]

Scott,

I see that scenario as a possibility at a good number of clubs.

One of the things that disturbs me the most is the perpetuation of the status quo when the utilization patterns, cultural values and demographics dramatically changed over the years. 

Yet, club leaderships continued to do things as they had in the past with little or no effort to react and respond appropriately and responsibly to these new forces.

Pat,

You are stating precisely the reasons we are where we are.  The demographics in our area have changed so drastically over the past 10 years or so, but our governing boards over that time failed to do much about it.  When they did announce the required assessments, which seemed to grow from year to year, more and more people left the club.

Thankfully, we have enough passionate members with the financial resources to make our transition a successful one, or at least, we hope it will be.

Scott

[CJ Carder]

If clubs allowed outside play, they may begin to fall into the category of for-profit, since they are not using outside money to cover expenses. (How Augusta National works with the coffers of money they get each year from the Masters, I am not sure. But ANGC is not-for-profit)

As was noted below too, The Masters is a separate entity aside from ANGC.  Regardless, I think I remember seeing somewhere a rough guesstimate of the annual revenue the tournament gets from advertising and television rights alone (i.e. IBM, Coca-Cola, CBS, ESPN, and I can't remember the other one) and it was simply staggering.  But nevertheless, ANGC donates a ton of that Masters revenue back to the Augusta community and other charities around the country / world - they just happen to do it very quietly.

[C. Squier]

]

 (i.e. IBM, Coca-Cola, CBS, ESPN, and I can't remember the other one)

Exxon Mobile.

[Sean_A]

Sean,

There are usually one or two of these cases a year.  The theory behind the tax exemption is basically that a group of people getting together for social purposes, who each throw money in a pot to pay for it, don't generate business activity.  An example is a group that meets montly for social purposes, caters a meal for the meeting, and pays for it that night by dividing up the cost.  No tax on the collections that pay for the meal.  That isn't really different from charging the group montly (or yearly) "dues" in advance to pay for the meeting and meal.   The "closed circle" is what does it. 

However, if they finance their activities by selling brownies to the public, and use the proceeds to lower the cost to the "members", then they are engaged in business of a sort and engaged with the public, and get taxed.

There's a lot of other stuff that goes into it, but basically, that's the idea.

Jeff

Jeff

Thanks.  So there have been clubs which lost their tax exempt status due to collecting visitor fees?  If so, were they cases in which it was deemed the club collected an unreasonable amount (over the limit - whatever that is) of visitor fees for a tax exempt body?  I was under the impression that a certain percentage (though I am unsure of that number) of visitor (perhaps this is confused with guest or perhaps there is no essential difference between the two in tax law?) money was allowable - which for some clubs is quite a significant amount of money.

Ciao

[TEPaul]

Sean:

That's true. The limit is considered to be 15% although some clubs seem to get into some pretty creative bookkeeping.

[Dan Herrmann]

Sean,
That's exactly why my non-equity club requires non-members that want to have a wedding to join as social members.  And we happily retain many of them.

Back to not-for-profit.  There are some very big non-for-profits in the USA that you'd never think were not for profit.  I used to work for one of them, The Vanguard Group in Valley Forge, PA.

Back to visitor fees.  A club is just that - a group of people with a love of golf that got together and built their own golf course and related facilities.   How can you not respect the right of a club to remain completely private if they so choose?   And if they do open up a few tee times for visitors, you should be expected to pay a premium for the privilege.

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