email : Webview : Golf's Future, Income Tax Benefits & The Unaffordable Golf Course

THE FUTURE OF GOLF

Greg Norman is 60 years old. In a recent interview with Golf.com Norman touted that the game needs to become more relaxed to attract more players. No longer one of the game's "young guns" Norman's comments take on a new meaning as it is not typically the "old guard" that encourage change and in the case of golf, the relaxing of the rules and customs that so many associate with the game. For several years, I have promoted more relaxed dress codes, fewer rules and free golf for kids as a way to grow the game.

While there is widespread agreement on the need to grow the game, there is considerable disagreement as to how. As we all know, recently the USGA banned the use of anchored putters beginning January 1, 2016 and more recently determined that scores from rounds played "solo" were inadmissable for handicap purposes. Both of these rulings are shortsighted and discourage those people from playing that are just the ones we need. The serious golfer isn't who we need to appeal to. My daughter, 22, fun and athletic thinks the golf atmosphere is stuffy and too full of rules. Because she can't wear Lulu Lemon and a hoodie, she simply doesn't play. I've seen her hit 200+ yard drives, make 40 foot putts and have infectious fun doing so that would be an asset to any club. Golf needs more of that. I consistently hear that the game needs more women, yet the atmosphere is very male dominated and uninviting to them. In Scotland, where they dreampt up this crazy game, dress codes are more relaxed, dogs roam the fairways with their masters and trolleys (motorized and not) are the norm.

Golf is an inherently inefficient use of real estate resources. Too few people use too much land. Therefore, to be economically viable (and affordable) golf needs a broader appeal. Of course, there will always be clubs where "tradition" can and will reign supreme but more and more some of the games traditions need to be allowed to evolve or the game will suffer irreperably. Some desire for golf to be aspriational and accessible only to the wealthiest few. When the discussion about relaxing some customs in favor of growth there will be those who ask "why"? There need to be more at the highest levels of the game asking "Why Not?"

ARE GOLF CLUBS MISSING A TAX BENEFIT?

William Ellis, CPA

Golf Clubs are continually improving their facilities similar, in many respects, to retail operations. Clubhouses are updated, renovated or simply refreshed. Golf courses are renovated or simply modified almost every year. Most of these costs are typically included in a club’s “capital budget” and are routinely capitalized. Previously, this has been consistent with tax authorities on the issue of capitalization versus expensing.

If your Golf Club is not tax exempt or is subject to current income taxes at the corporate or investor level, the Tangible Property Regulations (“TPR”) effective in 2014 may provide significant benefits – specifically the authority to currently deduct many clubhouse and golf course “improvements”.

The TPR regulations do not address non-building improvements in detail and are complex but some simple truths can be stated. Golf course improvements such laser-leveling tees, converting all greens to new mini Bermuda grasses, and bunker renovations, for example, likely can be expensed under the regulations. Clubhouse replacements of a major HVAC unit when there are 4 HVAC units, most clubhouse renovations/refreshments and resurfacing parking lots, for example, are also likely to be eligible for a current expense.

Simple point: If you are the original owner or have owned the property for several years AND if most if not all your “capital budget” improvements to the clubhouse and golf course are being capitalized, a simple TPR review should be considered. This can be confirmed by actions taken with your 2014 tax return and anticipated capitalization of 2015 costs. Certain rules and elections must be followed. Don’t miss out on some benefits of the new TPR regulations.

The author, Bill Ellis, is a retired former tax partner with EY and KPMG first practicing tax in 1972. He formulated, organized and led the KPMG and NGCOA efforts in 1999-2001 that resulted in the first IRS Industry Issue Resolution and RR 2001-60 providing the ability to depreciate substantial costs of golf course land improvements. He primarily advises owners of amenities that are not tax exempt. Bill can be contacted at tpr@williamellis.com

THE UNAFFORDABLE GOLF COURSE

For many years I've been wondering what it is that makes so many American golfers (especially club members) spend thousands on golf trips to Scotland to play on brown, less than perfectly manicured golf courses only to come home and complain when one little thing is out of place at their home club. Like everybody else, I enjoy not only the beauty but the playability of a perfectly manicured golf course. However, as the USGA suggests in the recently published article not only are such manicured conditions agronomically and environmentally unsustainable, the economics of the "Augusta Syndrome" are equally unsustainable. As one who has struggled throughout my golfing "career" with slow greens, I find that when I'm in Scotland, or somewhere with slower greens and limited water use the game takes on a new character and one that presents an entirely different challenge, especially relating to what Scots call the "weight" of the shot. Instead of throwing darts the player is required to consider the bounce, roll and other ground factors which (while not as precise) add an element we in America don't often get to enjoy. As anyone who's been to the UK (and other links environments) to play, and embraced the conditions (which can sometimes take time), it's really fun.

As the USGA so ably (and somewhat humorously) notes, the benefits can also reach both golfers and operators pockets as well. "Brown" can save or make you "Green".

THE GPA PRACTICE TEE

Some of our recent assignments have included:

NY - Appraisal of Ski Resort for acquisition

NJ - Appraisal of Private Club for improvement financing

NJ - Consulting for homeowners association for future planning of HOA owned golf course

NJ - Appraisal of private club for tax assessment analysis and appeal

NJ - Condemnation Appraisal of Private Club related to avigation easement rights for nearby public use airport facility

VA - Appraisal of Daily Fee Course for matrimonial dispute

FL - Appraisal of multi-course resort property for internal asset valuation

FL - Appraisal of private club for estate taxation

RI - Carnegie Abbey Club - FOR SALE - LEARN MORE

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