Social and Private Golf Club Tax Update: Unrelated Business Income Taxes Just Got Complicated

June 11, 2020

By: Robert Hendrix, Osborne Rincon CPAs

With the majority of golf clubs being re-opened in the past couple of weeks, it seems apropos that the IRS would be updating the regulations on how taxes will be computed on the private social and golf clubs.

With costs increasing and Boards not wanting to raise dues – and now with a pandemic to boot – clubs are trying to find ways of increasing revenues. Encouraging non-members to use the facilities seems to be a tempting way to fill that void.

Before the latest update, club controllers had to maintain three separate profit and loss statements for its member, non-member and investment revenue. The changes that have been proposed will create a nightmare for controllers and will have clubs taking a second look on the value of bringing in non-member revenue.

The changes may consist of the following:

  • Separate Accounting for Each Activity: Clubs will now have to create a profit and loss for each separate activity.
  • Gross-to-Gross Method Abolished: Clubs have traditionally been able to use the gross-to-gross method to allocate expenses to an activity. This will no longer be deemed a reasonable method to use.

These changes will most likely generate cause for activities that were previously not being taxed to ones that may have high tax consequences. Be sure you have a knowledgeable tax professional to guide you through these changes.

Robert Hendrix, CPA, MBA, is the Audit Manager at Osborne Rincon who works with many nonprofit entities including golf clubs, private schools and charitable organizations. Osborne Rincon is one of the oldest and most respected full-service accounting firms in the Coachella Valley. To learn more, call (760) 777-7805 or go to www.OsborneRincon.com

Last modified: June 11, 2020

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