The PGA's China Problem

When NBA Commissioner Adam Silver last year offered pro basketball as a vehicle for diffusing tensions between the United States and China, he was invoking the positive impact sports can have when it intersects with politics. Sports can provide a positive distraction that helps get a nation through hard times. It can be a unifying factor in the midst of domestic or international political divisiveness.

But there is also a dark side to the interaction between sports and politics, as when the money to be made leads sports conglomerates to partner with oppressive regimes while turning a blind eye to human rights abuses.

So when Silver stresses the importance, “particularly when tensions are high,” of “foster(ing) these sports, educational, cultural relationships,” keep in mind that the NBA has $5 billion in business investments in China. That is a huge incentive for easing tensions with their communist partner — and distracting attention from China’s brutal suppression of its own people.

Nor is basketball the only sport to forge a lucrative relationship with China. Major League Baseball signed a deal in 2018 with China’s biggest tech company to stream their games. The NHL and NFL also have deals with the same tech company. Eager to tap into the Chinese market, the NBA, MLB, NHL, and NFL pad their bottom line while avoiding any criticism of the government. And now golf’s PGA Tour has quietly followed suit and has its own little-known cozy relationship with China.

PGA Tour China is one of several developmental circuits run by the Tour. Founded in 2014, the 2021 PGA Tour China season was cancelled due to the COVID-19 pandemic, but PGA Tour officials recently reiterated their continued support of the tour. “We remain committed to the region and want to do everything we can to give competitive opportunities for players in Asia and from the Pacific Rim,” said Greg Carlson, PGA Tour Series-China executive director. The PGA Tour appears unfazed by China’s appalling human rights record, which currently includes accusations of brutal persecution of its Uyghur Muslim population.

China’s human rights violations are well-documented. The PGA Tour’s relationship with them, not so much — until now. The PGA Tour’s failure to file a 990 form disclosing its financial dealings with Chinese private equity firm Yao Capital and Chinese sports management company Shankai Sports, both of whom have close ties to China’s oppressive Communist regime, has it in the spotlight. Yao is financing a 20-year deal Shankai signed with the PGA Tour to manage the China series four years ago. As a tax-exempt organization, the PGA Tour is required to disclose such business dealings in China.

Asked to explain its failure to disclose its Chinese entanglements to the IRS, a PGA Tour spokesperson was recently quoted saying that the PGA Tour China Series is a separate entity, and that the activity of a subsidiary is not required to be reported on its Form 990, as it is not required to disclose ancillary contracts or deals.

This explanation doesn’t just fail the smell test. The PGA Tour’s questionable accounting shows it is acutely aware of the poor optics of running a golf league in China with the endorsement and cooperation of the Chinese government. It seems a clear case of the PGA Tour trying to have it both ways: gaining entry into the lucrative and largely untapped Chinese golf market, while flying under the radar of U.S. regulators and the IRS.

The renewed scrutiny into the Tour’s Chinese business dealings comes amid growing calls for lawmakers to reexamine the questionable tax breaks that sports leagues like the PGA Tour enjoy as an alleged non-profit charity. Considering that the Tour doesn’t have to pay taxes on projected revenues of $1.5 billion for 2022, the fact that it may be fudging its tax forms to slyly rake in more millions by partnering with an oppressive regime in China is not only not a good look. It should finally spell the end of the Tour’s beloved non-profit designation.

While it is unlikely, the PGA Tour could follow the lead of leagues like the NFL and MLB and voluntarily give up its non-profit, tax-exempt status. But since that probably won’t happen anytime soon, PGA Tour officials should either fully and transparently disclose their financial dealings with firms connected to the Chinese government, or simply stop doing business with China altogether.

If they refuse, it is time for federal regulators and lawmakers to take a long hard look at how the PGA Tour uses its non-profit status to hide its suspicious business activities in China and here at home.

Tom Anderson is director of the Government Integrity Project of the National Legal and Policy Center.