will the "European Model" of a private club become the norm in the US?

[PThomas]

I'm talking about places like Muirfield, where outsiders can play a few days during the week

doesn't this makes sense economically?

and if world-famous places like Muirfield do it, why can't /doesn't the US?

one place that comes to mind is Prairie Dunes, which is pretty easy, i believe , to get on

[Tom_Doak]

There are limitations to how much revenue a private club can take in from non-members and keep its tax exemptions ... that's the main reason.

However, it's also about different cultures.  Americans join a private club for the exclusivity.  If guests can come unaccompanied during the week, it's hard to sell that exclusivity at a premium.  It will take serious economic troubles to get the clubs you want to abandon their hard-earned privacy.

[PThomas]

Tom, I was talking about BRAND-NEW clubs...although it certainly seems to make sense for some to do it here

and maybe some Americans will have to change their midset re a "private' golf club

[Ronald Montesano]

Maybe you were thinking about brand-new clubs, but you were writing about established clubs (Muirfield and Prairie Dunes were cited); hence Tom Doak's confusion.

I wondered in a 2008 thread why we don't have more semi-private clubs and the tax-exempt status was the number one reason.  Followed closely by preservation of privacy, I came to a clearer understanding of why this apparently-logical model won't work.  Some isolated clubs might adopt it, although not all.

[Kevin_Reilly]

doesn't this makes sense economically?

If a private course needs outside revenue it would be simpler to just host charity tournaments on Mondays.

[Sean_A]

doesn't this makes sense economically?

If a private course needs outside revenue it would be simpler to just host charity tournaments on Mondays.

I think this is the main reason.  I don't think the tax issue is nearly as bad as people make out.  I went through the numbers before and it is pretty obvious that the expensive clubs can actually take in a load of outside dosh, its just that clubs choose to stay under this cap by holding charity events rather than opening the 1st tee for an hour a few days per week. 

I believe Prairie Club is going to go more British style by allowing visitors at a serious premium. 

Ciao

[Mark Pearce]

There are limitations to how much revenue a private club can take in from non-members and keep its tax exemptions ... that's the main reason.

However, it's also about different cultures.  Americans join a private club for the exclusivity.  If guests can come unaccompanied during the week, it's hard to sell that exclusivity at a premium.  It will take serious economic troubles to get the clubs you want to abandon their hard-earned privacy.

I think the members of Muirfield and its like feel they are members of pretty exclusive clubs.  They get to be completely free of visitors 5 days a week and have much cheaper subs too.

[astavrides]

What is the reason private clubs get to be tax-exempt?

How much do private clubs get paid when they hold a charity tournament?  Isn't that the opposite of charity?

[Richard Hetzel]

There are limitations to how much revenue a private club can take in from non-members and keep its tax exemptions ... that's the main reason.

However, it's also about different cultures.  Americans join a private club for the exclusivity.  If guests can come unaccompanied during the week, it's hard to sell that exclusivity at a premium.  It will take serious economic troubles to get the clubs you want to abandon their hard-earned privacy.

Which is too bad. I wonder how many people might end up joining a private club SIMPLY BECAUSE they had an opportunity to play there af ew times, thus falling in love with the course and what the club has to offer.

[Sean_A]

There are limitations to how much revenue a private club can take in from non-members and keep its tax exemptions ... that's the main reason.

However, it's also about different cultures.  Americans join a private club for the exclusivity.  If guests can come unaccompanied during the week, it's hard to sell that exclusivity at a premium.  It will take serious economic troubles to get the clubs you want to abandon their hard-earned privacy.

I think the members of Muirfield and its like feel they are members of pretty exclusive clubs.  They get to be completely free of visitors 5 days a week and have much cheaper subs too.

Mark

I really like the Muirfield system.  It is somewhere in the middle of the US and UK systems.  The members aren't terribly put out (though I expect the system partly works well because of no day lost for the traditional Ladies Day), the club gets loads of dosh out of it & visitors generally rave about the course, club and the welcome.  All around I think Muirfield really has its head on straight.

Ciao

[Steve Salmen]

There's something ironic when discussing Muirfield's exclusivity.  It has two new neighbors that are following the American model of the private club.   

[Jeff Goldman]

What is the reason private clubs get to be tax-exempt?

How much do private clubs get paid when they hold a charity tournament?  Isn't that the opposite of charity?

Ok, on the understanding that this isn't tax advice, under section 501(c)(7) of the internal revenue code, certain organizations organized for social, but not business, purposes are exempt from federal income tax.  The theory behind this is that the organization is simply the holder of a pool of money contributed by individuals to socialize, and it isn't right to tax a group of people who, rather than spending money as individuals for social purposes, i.e., rent out a park baseball field and have games every saturday, pool their money together, and use that pool of money for social purposes, i.e., to own and operate a golf course.  If an individual runs a league, and collects fees from participants to use for expenses, he's not taxed on the fees he collects, and the club is the sam. 

The organization itself isn't a business since in theory all of its revenue comes from the individual members.   That's why the IRS has rules to ensure that the club is organized for social purposes or to make a profit.  That's also why outside income is limited, because otherwise outsiders would be subsidizing the member's activities, and that would be conducting a business designed to earn profits, with the profits used to defray costs of the members.

To make things easy on outside income, the IRS has a safe harbor, which allows social clubs to get 15% of their gross revenue from nonmember activities.  The IRS also is ok with occasional big dollar events like tournaments, but if you hold a tournament every year, and use that money to support the club, you'd probably lose your exemption (regardless, the club still has to pay tax on the profits from the occasional big event, even if it is tax exempt).   

I know Sean thinks that there can be a lot of nonmember play and still stay below the 15%, but if you hold monday outings and some banquets not sponsored by a member, it isn't that tough to get close to the number (initiation fees don't count in determining gross revenue).  Also, there is something funny about a member spending a big number per round in dues and other costs, and letting nonmembers play for a lot less.

[Mike Nuzzo]

To make things easy on outside income, the IRS has a safe harbor, which allows social clubs to get 15% of their gross revenue from nonmember activities.  The IRS also is ok with occasional big dollar events like tournaments, but if you hold a tournament every year, and use that money to support the club, you'd probably lose your exemption (regardless, the club still has to pay tax on the profits from the occasional big event, even if it is tax exempt).   

Why is the US Open non-profit?
Is it?

p.s.
Thanks Jeff.

[Steve Salmen]

Jeff,

Is there a difference in how the British tax authorities treat the status of private clubs in the UK than how we do so here?  

I've always thought it would be a good thing if private clubs here made their courses here a little more accessible.  

[Anthony Gray]

  CULTURE, CULTURE, CULTURE. The main reason that private clubs do not allow outside play is the respect for the game. American golfers simply misbehave more on the course than the Euros. Slow play is tolerated more on public courses in the US. Driving carts crazy is more prevelent. The private clubs want to keep the people away that do not respect their fellow golfers. The european clubs can open their doors without the fear of people disrespecting the course and fellow golfers.

  Anthony

[Sean_A]

What is the reason private clubs get to be tax-exempt?

How much do private clubs get paid when they hold a charity tournament?  Isn't that the opposite of charity?

Ok, on the understanding that this isn't tax advice, under section 501(c)(7) of the internal revenue code, certain organizations organized for social, but not business, purposes are exempt from federal income tax.  The theory behind this is that the organization is simply the holder of a pool of money contributed by individuals to socialize, and it isn't right to tax a group of people who, rather than spending money as individuals for social purposes, i.e., rent out a park baseball field and have games every saturday, pool their money together, and use that pool of money for social purposes, i.e., to own and operate a golf course.  If an individual runs a league, and collects fees from participants to use for expenses, he's not taxed on the fees he collects, and the club is the sam. 

The organization itself isn't a business since in theory all of its revenue comes from the individual members.   That's why the IRS has rules to ensure that the club is organized for social purposes or to make a profit.  That's also why outside income is limited, because otherwise outsiders would be subsidizing the member's activities, and that would be conducting a business designed to earn profits, with the profits used to defray costs of the members.

To make things easy on outside income, the IRS has a safe harbor, which allows social clubs to get 15% of their gross revenue from nonmember activities.  The IRS also is ok with occasional big dollar events like tournaments, but if you hold a tournament every year, and use that money to support the club, you'd probably lose your exemption (regardless, the club still has to pay tax on the profits from the occasional big event, even if it is tax exempt).   

I know Sean thinks that there can be a lot of nonmember play and still stay below the 15%, but if you hold monday outings and some banquets not sponsored by a member, it isn't that tough to get close to the number (initiation fees don't count in determining gross revenue).  Also, there is something funny about a member spending a big number per round in dues and other costs, and letting nonmembers play for a lot less.

Jeff G

That is why I think clubs choose charity events.  It sounds easier to organize over the long haul - bigger bang for the buck.  I was more leaning toward if clubs (especially the mega babies with huge overheads) didn't pursue the option of charity events etc they could have one heck of a load of visiting green fees even at seriously high prices.  Think about it, if a club has a operating budget of $5,000,000 that is $750,000 allowable from outside sources.  Say food and the pro shop take a third each for argument sake.  That still leaves $250,000 a year in outside green fees.  That is 500 green fees at $500 a pop (of course the price can be scaled down to fit whichever club).  Say a club is open 8 mos a year or it doesn't want visitors during prime season - that leaves 63 green fees a month or 14 a week.  Guess what, that is less than 1 hours worth of tee times in a week - its laughable that folks think this is a terrible imposition on any club.  I think you are getting the picture, there is loads to be made off visitors and still stay way under tax exemption status without giving up anything like a lot of tee times.  Jeff, my visitor scenario was always meant as an either/or deal, not hold charity events and rake in visitor cash. 

Anthony - the same folks who pay UK green fees would be paying the US green fees.  You put the price high enough (to make it worthwhile for the club) and most yahoos stay away.  In my experience, it is far better to have individual groups coming through the doors than big groups such as charities.  Charities are in business to raise money, not vet the golfing etiquette of their donators.

Ciao

Ciao

[Anthony Gray]

  Sean,

  I agree. My club is just so mismanaged. My wife called ahead today to place a lunch order but they are low on food.

  Outside play would help with revenue. But a pro that plays more than once a month would also help.

  Anthony

[Jeff Goldman]

"Why is the US Open non-profit?

Is it?"

Mike, 

Actually, the USGA, which "owns" the US Open is a  nonprofit organization (being a nonprofit doesn't mean you can't make a profit) of a different type.  I was speaking about the fees country clubs earned from holding tournaments like the US Open.  I heard a rumor that Oakland Hills earned something like $7-10 million from the Ryder Cup, and who knows what they got for the PGA.  Those numbers are way above the 15% limit on nonmember income for those years.  However, the IRS does not hold occasional special events against a club, so, as long as the club pays income tax on the big fees they get for holding a US Open every 15 years, it won't kill their tax exemption.  However, I would be shocked if a place like Westchester CC was still a nonprofit after holding their tourney for so long, unless they donated the course. 

Sean, I think that many, if not most clubs do have an informal system like you mention, because they allow unaccompanied play, which can often be set up by the nonmember's head pro.  The green fees may be very, very high (often $300-400), and the club may do several hundred rounds that way.  So your suggestion may already be somewhat of a reality.

[astavrides]

Sean, I think that many, if not most clubs do have an informal system like you mention, because they allow unaccompanied play, which can often be set up by the nonmember's head pro.  The green fees may be very, very high (often $300-400), and the club may do several hundred rounds that way.  So your suggestion may already be somewhat of a reality.

May be true, but I doubt my muni's head pro will have much juice in that regard.

[Sean_A]

Sean, I think that many, if not most clubs do have an informal system like you mention, because they allow unaccompanied play, which can often be set up by the nonmember's head pro.  The green fees may be very, very high (often $300-400), and the club may do several hundred rounds that way.  So your suggestion may already be somewhat of a reality.

Jeff

The really weird thing about approaching clubs for special access is that I have never once paid for the privilege.  I am assuming that many clubs have a certain number of write off guests that the Dir of Golf and/or the Pro can arrange.  It would be an easy thing to overcome in the UK because one can always make a donation to the Jr Section or the Captain's Charity, but when I tried this in the States I just got quizzical looks.  So what does one do other than spend a load of dosh in the pro shop and write a thank you note?  When one really gets down to it, a lot of US club memberships really are quite generous and if one accepts that letter writing to the right person is the key and that there should be no hard feelings for a no reply then all is well.

Ciao

[Andrew Summerell]

Sean, I think that many, if not most clubs do have an informal system like you mention, because they allow unaccompanied play, which can often be set up by the nonmember's head pro.  The green fees may be very, very high (often $300-400), and the club may do several hundred rounds that way.  So your suggestion may already be somewhat of a reality.

Jeff

The really weird thing about approaching clubs for special access is that I have never once paid for the privilege.  I am assuming that many clubs have a certain number of write off guests that the Dir of Golf and/or the Pro can arrange.  It would be an easy thing to overcome in the UK because one can always make a donation to the Jr Section or the Captain's Charity, but when I tried this in the States I just got quizzical looks.  So what does one do other than spend a load of dosh in the pro shop and write a thank you note?  When one really gets down to it, a lot of US club memberships really are quite generous and if one accepts that letter writing to the right person is the key and that there should be no hard feelings for a no reply then all is well.

Ciao

Sean, I've found the same. I've been fortunate to play many private courses in the U.S. simple by taking the same approach. In most cases it was on exceptionally quiet days. Maybe the fact that I was coming from Australia, & soon going back, made it a little easier.