This article is the second in a special six-part series commemorating the 50th anniversary of the National Club Association. Over the years, NCA has kept the private club industry informed, engaged and protected from legislative, regulatory and legal issues that threatened the rights and privileges of private clubs.
This article from October 1997 covers the efforts of NCA and its members to protect the ability to classify caddies as independent contractors. An integral part of golf’s rich history, caddie programs were endangered when a routine Internal Revenue Service (IRS) audit in 1995 at the Westchester Country Club in Rye, New York, ruled that caddies should be classified as employees and not independent contractors. While Westchester Country Club appealed the initial IRS determination, the National Club Association began a multi-year program to rally members, including establishment of the Coalition to Preserve Caddie Programs, and to lobby for legislation to preserve independent contractor status for caddies.
Legislation introduced in 1997 by Rep. Dan Burton (R-Ind.), H.R. 2321: The Caddie Relief Act, failed to advance because there was no tax legislation to which it could be attached. However, though the act never became law, it established a grassroots movement to support caddie programs and created greater awareness of the issue in Congress and the media of the many benefits caddie programs provide to young men and women. Although the IRS ultimately settled the issue in favor of the club, many clubs continue to walk a legal tight rope concerning the employment classification of golf caddies. Today, independent contractor status for caddies remains important to this centuries old golf tradition and continues to support caddies through jobs and scholarship programs.
NCA’s lobbying activities for the Caddy Relief Act of 1997 was just one of many instances over the years in which private club issues—regulatory, legislative and legal—have been defended and supported for the benefit of the industry. This visit back in time illustrates that whether an issue affects a single club or the entire industry, NCA will be vigilant in its mission to defend, protect and advance the interests and well-being of private, social and recreational clubs.
Caddies Left Holding the Bag under Pending Legislation
Why H.R. 2321 is Good for Golf
Club Director, October 1997
The mainstay of what was once a walking game, caddying is golf’s oldest profession. And while some caddies are older and carry golfers’ bags for a living, they are also likely to be youngsters who benefit as much from scholarship and community programs as from actual wages earned.
The numerous philanthropic enterprises that have developed to benefit youth and introduce new generations to the game of golf are now being threatened by Internal Revenue Service (IRS) attempts to reclassify caddies as club employees. Potential legal and tax issues concerning their work status remain unresolved.
According to NCA’s 1997 Club Operations Survey, 63 percent of responding golf and country clubs has caddie programs, and nearly 96 percent of those treat caddies as independent contractors. The traditional view has been that a caddie works for an individual club member, and if the club is involved in the relationship at all, it is only as a go-between to collect money from the golfer and distribute it to the caddie.
Why Legislation Is Important
The IRS has waged an aggressive crusade against the use of independent contractors by American industry for a number of years. In 1995, the IRS assessed Westchester Country Club in New York significant penalties for allegedly misclassifying caddies as independent contractors. Westchester has been fighting the IRS decision, which has been under administrative appeal ever since.
Not every club has the resources to combat the IRS. Recognizing the need to pool support from the entire golf community, NCA formed the Coalition to Preserve Caddie Programs. It is composed of more than 50 state and regional golf associations and caddie scholarship programs.
NCA lobbyists also began visiting legislators to educate them about the tax issues and the importance of preserving caddie programs. This summer House Government Reform and Oversight Chairman Dan Burton, himself a former caddie, took up the cause and introduced the Caddie Relief Act of 1997, H.R. 2321. If passed, H.R. 2321 will codify caddies’ status as independent contractors, and will thus help preserve many fine caddie programs nationwide.
Former Caddies Respond
After H.R. 2321 was introduced, NCA immediately alerted its members that have caddie programs, Caddie Coalition members, and NCA key contacts. We asked them to write to their legislators to urge them to co-sponsor the legislation. The response has been tremendous.
NCA has received numerous copies of letters from individuals who have personally witnessed the benefits of involvement in caddie programs. These letters arc filled with accounts of people who are successful today, but might not have had the chance to attend college or be exposed to career-oriented people if they had not worked as caddies.
For example, a businessman who lost his father when he was young wrote about how his regular golfer treated him like a son. Furthermore, he said the money and scholarship he earned enabled him to start a successful career. In a similar letter, a single mother credited a caddie program with not only giving both of her sons the opportunity to attend college, but also the chance to develop relationships with positive male role models.
Caddie Scholarship Programs Provide Gateway to the Future
A number of scholarship programs exist today exclusively for caddies. Many state and local golf associations and individual golf clubs sponsor these programs. The combined annual contributions are enormous, amounting to millions of dollars. These programs give thousands of deserving students an opportunity to further their education.
The Evans Scholars Foundation administers the largest privately funded college scholarship program. Since the first two scholars enrolled at Northwestern University in 1930, over 6,500 young men and women from families with modest financial means have graduated from the program. More than 480 member clubs, over 125,000 golfers, and 22 affiliated associations support the program. Applicants are selected on the basis of their academic record and financial need.
In recent years the United States Golf Association (USGA), the Western Golf Association (WGA), several state and regional golf associations, community groups, and others have launched various campaigns to initiate golf programs for young people. This year, Prudential Insurance sponsored Boston’s first inner-city golf clinic for the Boys and Girls Clubs of Boston and the Boston Parks Department’s Caddie Scholar Program.
Several years ago the City of Portland, Oregon, instituted the Eagle Program at its municipal course. This program gives inner-city youths jobs as pro shop assistants and provides opportunities for them to work as caddies.
The USGA’s charitable arm, The USGA Foundation, has developed a number of youth programs all aimed at getting kids involved with golf and caddying. Grants in excess of half a million dollars have been allocated to this outreach program. Contributions are provided to groups like the Boys and Girls Clubs of America, Hook a Kid on Golf, Oglebay Caddie Camp, Camp Sankaty Head, and Special Olympics.
If the game of golf is to continue to thrive and grow, it needs a constant infusion of young people. The success of community programs and the recent popularity of Tiger Woods is encouraging more youngsters to become interested in golf. Working as a caddie is a great way to gain that initial exposure to the game for young people who ordinarily couldn’t afford to play.
Preserving a Venerable Tradition
Caddies have been an essential part of the game since the first golf club was formed in Scotland in 1746. Today, the close relationship between caddie and golfer remains unique.
However, caddie programs have been on the decline for many years. In addition to uncertain legal liabilities attendant with the programs, caddies also face competition from the increasingly popular golf car. Unfortunately, caddies do not bring revenue to a club as golf car rentals do.
Many golfers do not know the pleasures of an invigorating walk on a beautiful course and the fun of discussing life and the future with a young caddie, much less learning the intricacies of a course with a career caddie by their side.
Because it is often a first job, caddying provides outstanding work ethic for young men and women. These programs also expose young people to good role models. Some of the world’s greatest golfers, as well as many successful executives and elected officials, are former caddies.
If the Caddie Relief Act of 1997 becomes law, caddies will finally be protected from IRS attempts to reclassify them as employees, and clubs will find it easier to maintain or even to start caddie programs. This important gateway for young people to enter the workforce, apply for college scholarships, and be introduced to the game of golf will be preserved.
NCA is now gearing its efforts toward obtaining additional co-sponsors for the
Caddie Relief Act of 1997. This endeavor is vital to the success of the legislation, particularly when Congress reconvenes in January. For information about how you can help, see the sidebar below.
Editor’s Note: H.R. 2321 did not become law because there was not tax legislation to which it could be attached during the 105th Congress. NCA’s lobbyists worked with key members of Congress to ensure the legislation was reintroduced in 1999. Though the number of co-sponsors was increased for the Caddie Relief Act of 1999 and the supporters included more than 120 national, state and regional associations, organizations and clubs, the legislation once again was not incorporated into tax legislation. The IRS ultimately agreed to withdraw its position that the Westchester Country Club’s caddies were incorrectly classified as independent contractors, along with more than $300,000 in penalties and back taxes that the IRS had assessed the club. This ruling was consistent with an earlier ruling in 1969 that classified caddies as independent contractors.
Excerpts from Supporters of H.R. 2321
Dan Burton (R-Ind.) introduced the Caddie Relief Act of 1997. He served as Chairman of the Government Reform and Oversight Committee during this time period. Together with Eni Faleomavaega (D-American Samoa), they wrote this letter to fellow Members of Congress seeking support for the legislation.
PAR FOR THE COURSE – BIG GOVERNMENT IRS
ACTION THREATENS EMPLOYMENT OPPORTUNITIES FOR
AMERICA‘S YOUTH! HELP SAVE THE CADDIES!
Once again, the actions of the Internal Revenue Service threaten to displace another group of American workers. This time, their efforts are all the more insidious as they threaten employment opportunities for America’s youth. If the IRS has their way, we can add golf caddies to the endangered species list, as they will be a thing of the past.
The IRS wants to change the tax definition of caddie work from an independent contractor to employee. We are not talking about professional caddies, but our nation’s young people. In most cases, these young caddies don’t make enough to pay taxes in the first place. Furthermore, it is typically the golfer who pays the caddie, not the golf course. Yet, the IRS appears ready to demand that public and private courses make tax and Social Security withholding payments just as though they were the employer. If this action is codified, public and private golf courses will have to start withholding income and Social Security taxes on what caddies earn. This sets up another layer of bureaucracy that most courses will not want to put up with. Instead of the added burden of additional paperwork, these courses will replace their caddies with golf carts. The IRS potentially will put thousands of caddies out of work permanently if we don’t stop them.
Many golfing greats got their start as caddies, including the late Ben Hogan, Charlie Sifford,
Lee Trevino, and Chi Chi Rodriguez. However, this is not just an issue of jobs. It’s about young boys and girls learning valuable life skills such as hard work and interpersonal skills. Let’s stop the IRS from enacting this ill conceived idea and help save America’s youth! Please join me in cosponsoring “The Caddie Relief Act of 1997.” Contact Bill O’Neill of my staff at 225-5074 to sign on to this important legislation.
Dan Burton and Eni Faleomavaega
July 31, 1997
Another strong supporter of H.R. 2321 was Michael C. Fondo. At that time, Fondo was a tax attorney with Choate, Hall & Stewart in Boston, and a former attorney-advisor on the U.S. Tax Court. He was published in articles appearing in Sports Illustrated magazine and The Wall Street Journal. Below are excerpts from his articles.
A Taxing Situation
The motorized golf cart has severely curtailed the use of caddies in most parts of the U.S., and now a bureaucratic enemy, the Internal Revenue Service, is poised to deliver the fatal blow to the country’s remaining caddie programs.
The IRS is threatening the existence of these caddies through an audit of Westchester Country Club in Rye, N.Y. The IRS contends that Westchester’s caddies are club employees rather than independent contractors, even though club members pay caddies in cash out of their own pockets.
If the IRS succeeds, Westchester—and all other courses with caddies—could be forced to put the loopers on their books and then deduct income and social security taxes from the caddies’ wages and contribute to social security on their behalf. The cost of keeping such records and paying social security taxes would at best drive up the cost of using a caddie and at worst give all but the most tradition-bound clubs a good excuse to replace caddies with carts.
If the IRS wins, golf loses. People fortunate enough to play at courses that still have strong caddie programs may soon find their fairways crisscrossed by cart paths. Gone will be the uninterrupted acres of green where men walked a game, replaced by the cement legacy of the IRS’s decision.
Mark Twain called golf a good walk spoiled, and it sure will be if the IRS gets its way. In the meantime, I’ll keep walking and carrying my bag, looking forward to the day when I can join a club. I just hope there’ll be a caddie waiting for me when I arrive at the 1st tee.
Michael C. Fonda
Sports Illustrated, August 1997
IRS Bogey-Man Threatens Caddies
This IRS action is particularly disturbing in light of the law at issue. Most caddies work when they want, receive minimal training at their golf courses, and are paid “by the bag,” not by the hour—all earmarks of independent contractors. As for the “safe harbor,” the IRS has apparently concluded that golf clubs may not rely on it in cases in which the golf clubs have not issued caddies IRS Forms 1099 showing amounts the caddies were paid—-a particularly outrageous position since it is typically the individual golfer, and not the golf club, who pays the caddie, and thus a golf club would have no reason to issue a Form 1099.
Congress should amend the Internal Revenue Code to make clear its intention that caddies not be treated as employees, as it already has for newspaper carriers under 18. And it should do so before thousands of caddies find themselves unemployed. Instead of learning the value of hard work and solid interpersonal skills, these youths may soon be learning about how their government can arbitrarily eliminate anyone’s job.
Michael C. Fondo
The Wall Street Journal, June 3, 1997