The analysis of this question is similar to tax-exempt bond financing for golf courses, as tax-exempt bonds have similar restrictions and are fact-sensitive. Consider analyzing these OZ issues with an attorney who has an expertise in public finance.
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Can a golf course be an exemption to the sin business list if it is open to the public and operated in conjunction with a hotel?
Could the golf course be considered “incidental” to the hospitality operation of the hotel?
Answers
The sin businesses are from a 1986 rule related to bond financing.
No, but the hotel separately in a stand-alone entity could be. I believe there are some interesting planning opportunities doing an OZ deal next to a golf course that does a conservation easement, so long as the course is public and does not have gated restrictive access.
A golf course is a sin business. No portion of the investment may be made in this, even if incidental.
I wouldn't bet on it. Way too much uncertainty. Opening it up to the public doesn't matter the way I see it. The golf course being incidental to the hotel is material, but I don't think that saves the day because the golf course is a disproportionately large percentage of the acreage. This is not the same as a spa being incidental to a hotel, in my view.
The list of sin businesses does not provide exceptions. In the case of a golf course, it is not incidental to the hotel operations since you can operate a hotel without the golf course. This would need to be studied further, but it seems to be safer to have the golf separated from the entity operating the hotel.
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