While Palmer was not being kicked out of the USGA, Holland said his role as honorary chairman of the Members Program would not be as "visible."
"Until we get to a point where we do have a common understanding of the use of this nonconforming equipment, I don't think we want him to be a real visible part of that," Holland said from his home in Indianapolis. "We're not real comfortable with that."
Palmer and former President Ford began as honorary chairmen of the USGA Members Program in 1975.
Holland said Palmer's signature was not on the recent batch of letters sent out in December to attract new members, and that he would be removed from the USGA's annual yearbook.
Palmer shocked the USGA in October when he endorsed the new ERC II driver from Callaway Golf, which was purposely designed to exceed the USGA limits for trampoline effect how quickly the ball springs off the face of a driver.
The Royal & Ancient Golf Club, the governing body in golf everywhere but the United States and Mexico, decided late last year that extra distance was not bad for the game and deemed the ERC and other such drivers legal for competition.
Pierre Fulke of Sweden used an ERC II when he finished second in the Match Play Championship in Australia.
Palmer, a four-time Masters and U.S. Open champion whose charisma led to golf's popularity boom in the 1960s, signed a 12-year endorsement deal with Callaway in June.
While Palmer has said that non-conforming drivers should not be allowed in competition, he supports using them for recreational golf.
"My feeling is, if it helped people have a little more fun, I thought it was fine," Palmer said in an October interview.
The USGA has not been able to define "recreational golf," and recently sent out a notice that a score cannot be submitted for handicap purposes if a player used a non-conforming club.
Palmer could not be immediately reached for comment.
David Fay, executive director of the USGA, met with Palmer in October and, while they still disagreed over the drivers, "that doesn't override the fact we want him as our national chairman of the Members Program."
Holland said the USGA met with Palmer last month and again on Jan. 5, but the two sides have not been able to find common ground.
"On the one hand, Arnold has done more than anybody in the history of the game to promote it," Holland said. "On the other hand, it was an awkward situation for us to have him in a visible position as a spokesperson for the Members Program."
Holland first mentioned Palmer's reduced role during the annual meetin Saturday of the Georgia State Golf Association.
"I don't think we're ever going to get to the point where we are going to publicly fire Arnold Palmer," he said in the Atlanta Journal-Constitution. "I don't think that would be good for the game."
Holland also said Palmer would resume his high-profile position with the USGA.
"If he were to say tomorrow, 'I've considered all this and my position has changed,' then he might get back in there," Holland said.
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