Non-Profit Status

Tim Hewitt

WCHA Member in Maine
bob goeckel said:
ya tim you are to blame for this god aweful addictive website!!!!! :D ;) jeez that helps take some of the heat off me. :cool:
Why do you think I don't hang out here and post every day any more. I have to convince myself I still have a life!


It doesn't help that I get an email copy of every posting made and simply have to read them with the eye of a moderator and move on... I could post on dozens of threads every week if I let myself :eek:

Here’s an example of how things go in non-profit organizations.

In the summer of 1999 I read in Wooden Canoe that the WCHA was incorporated as 501-c-7, (social club) rather than a 501-c-3 organization (educational organization.) I work with non-profits and this puzzled me. So I wrote Jack Gregg, then a Board member, about it. There were advantages to being a 501-c-3 and I thought it would be good for the WCHA to become one.

Jack wrote back that he would look into and he did and then there then followed a long period in which he forwarded me bylaws, articles of incorporation, and we reviewed together the whole history of the incorporation of the WCHA. He brought all this to the Board’s attention, the Board appointed a sub-committee to look into and make a recommendation. It was studied. Together with my wife, who is a lawyer who works with nonprofits, I put together a plan for how the WCHA might go about becoming a 501-c-3.

All this took until the summer of 2002. Meantime, two presidents of the Board died (Dave Baker being one and Tom MacKenzie served briefly as interim President: forgive me but I forget the other name) and about February 2003, Bill Conrad took up the chore. I emailed him a bunch of stuff that I hoped would bring him up to speed on the 501-c-3 thing. At that summer’s Assembly at the membership meeting, applying for reclassification as a 501-c-3 was presented and, after some debate and discussion, approved. (Jack Gregg by this time was off the Board, I think.)

On July 15th, 2003 paperwork was filed by Bill with the IRS to change the classification to 501-c-3. Bill and the lawyers guessed the IRS might get around to approving this change by the end of the year. Lo and behold, about two weeks after Bill sent off the paperwork the IRS replied that of course we should have been originally recognized as a 501-c-3 in the first place and not as a social club and they were immediately and retroactively recognizing the WCHA as such! (And that must set some kind of record for action by the IRS.)

As I wrote Jack in February 2004, “I’m very pleased about how 501-c-3 thing worked out. Its amazing, though, how much time was spent to deliberate and make the change when finally it was self-evident that the original lawyers and IRS had just goofed up.”

All this is not a complaint, by the way. It just shows how slow things can go sometimes in a non-profit. I make it about four years from the idea to getting the job done.
First off, maybe I have a logical tidy mind and it didn’t seem right to think of the WCHA as a “social club.”

First as a 501-c-3 the WCHA would be eligible to receive grants from foundations and corporate philanthropies. Second, the WCHA would be more attractive to individual donors who might want to make a substantial gift of cash or assets for estate or other tax purposes (such a gift would be tax deductible.) Third, individual membership contributions to 501-c-3’s are tax deductible.

Mind you, I’m not advocating that any of these things –especially getting philanthropic grants—should be done. I just thought it prudent to get it right in case such an opportunity occurred.
Not a "social club", there sure seemed to be a lot of socializing going on at the Assy this year. :)

Does this mean that the dues are now deductable??
"Third, individual membership contributions to 501-c-3’s are tax deductible."

Either way, thanks to you and the others for going to all the effort to make it happen.

To the best of my knowledge, your membership dues are tax deductible.Mind you, I'm not 100% certain about anything having to do with the IRS (nor is the IRS), but I deduct WCHA membership and others like as charitable contributions.
Larry Meyer said:
To the best of my knowledge, your membership dues are tax deductible.Mind you, I'm not 100% certain about anything having to do with the IRS (nor is the IRS), but I deduct WCHA membership and others like as charitable contributions.
See your tax accountant of course, but you are normally only allowed to deduct anything OVER the value of a magazine subscription when your membership fee includes a magazine subscription.

I'm not sure standard WCHA dues would be deducatble. Anything in the "extra" dues level would be I assume, however I doubt standard dues are...

I don’t think that’s right Tim. I belong a dozen non-profit 501-c-3s, many of whom supply a member magazine as a benefit of membership: AMC, Mass Audubon, National Audubon, and on and on. I’ve always included my membership contribution to these organizations as charitable tax deductions and none make any effort to distinguish what part of membership money buys the magazine. Providing a journal or magazine to members is considered a way of carrying out the charitable educational function of the organization.

Commercial magazine subscriptions could be tax deductible as business expenses, if your work is associated with the topic of the magazine. Lawyers, accountants, doctors, etc, can deduct the cost of subscribing to journals of importance to their work as business expenses.
Deductable business expenses and tax deductable charitable contributions are two very different things in the eyes of the IRS.

Larry, you should look closely at the AMC renewal forms - they clearly state that dues are not deductable - however donations outside of dues are... I just sent mine in...

Again, I'm no tax expert - though I've been audited a dozen times in the last 30 years - so see your tax advisor before you make your final decision on how much of your membership fee you consider tax deductable.

I can assure you that the WCHA is not going to take any sort of formal position on how much of your dues if any you can deduct from your income taxes.

Oh, plainly business and charitable deduction are different balls of wax. I was just dealing with the common thread of magazine subscriptions. Some can be taken as deductible on the business side if they pertain to your occupation or profession. Some magazine subscriptions can be taken as deductions if they help you invest your money, for example.

Well our practice of taking our memberships as fully tax deductible goes back to the days when my wife was Assistant Attorney General for the Commonwealth of Massachusetts in the Public Charities Division, so I have always assumed she knew what she was doing.
If you want to see what the IRS has to say go to the following, which is IRS publication 526.

I gave it a quick read and the main issue seems to be the definition of “benefit.” Generally, benefit means a substantial cash benefit. To quote.

"Membership fees or dues. You may be able to deduct membership fees or dues you pay to a qualified organization. However, you can deduct only the amount that is more than the value of the benefits you receive. You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. They are not qualified organizations.
Certain membership benefits can be disregarded. Both you and the organization can disregard certain membership benefits you get in return for an annual payment of $75 or less to the qualified organization. You can pay more than $75 to the organization if the organization does not require a larger payment for you to get the benefits. "

Now AMC may have changed things becaue they offer member discounts on hut fees, etc. But it would seem to me if you don't actually take advantge of a reduced rate on hut fees, your membership would be fully deductible still.
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What the IRS wants to do, my wife tells me, is to deter quasi-commercial transactions that some organizations run under the semblance of being non-profit organizations. If I join a “non-profit organization” for $200 and in return they send me 180 dollars worth of hamburger, or a gift coupon worth $180 bucks worth of hamburger “free of charge,” that’s the kind of benefit they mean.

On the other side, for example, I am a member of WGBH, public television. I get a member magazine, etc., etc. They tell me my membership is fully tax deductible “except for the value of any premiums or thank you gifts I receive.”

Dues at country club (a social club) are not deductible.
With my post of a ways back, I did not mean to hijack the vent thread into a discussion of IRS and tax deductions. However, I do think it’s a service to WCHA members to have somewhere posted a summary of the tax consequences and possible benefits to members of membership and contributions to the WCHA. Many large non-profits maintain staff whose sole purpose is to increase the organization’s revenue by aggressively using tax incentives to increase contributions.

In sum, I think it’s accurate to say your membership in the WCHA is fully tax deductible as a charitable contribution because the WCHA is recognized as a 501-c-3 charitable organization. Any financial contribution you would make in excess of basic membership would also be fully tax deductible. Any contribution you would make of property would also be fully tax deductible under the “fair market value” rules.

What is not allowed is to treat financial transactions with non-profit organizations that would otherwise be viewed as commercial transactions as tax deductible. For example, suppose the WCHA had a membership structure that supplied those who gave $2000 an additional membership benefit of a “free” canoe by Rollin or Jerry. That’s a no-no.

Anyway, re the first paragraph, perhaps it would be appropriate to have something printed in Wooden Canoe, approved by the Board, that spelled this out. Possibly the website too.
Not to harp on it, but here's the text from my renewal notice with the AMC:

"..AMC Dues are not tax deductable. To learn more about making a tax-deductible gift to AMC, please call 617-523-0655 and ask to speak to someone in the Development Office."

I would be surprised to have anyone at the WCHA take any position otherwise unless they are specifically instructed otherwise by their tax attorney, as our "members benefits" are basically the same as the AMC - that is a magazine subscription.

Again, I'm no tax attorney and will not give other people tax advice - so take this in the spirit it's offered.

Don’t doubt for a minute the sincerity of your interpretation, Tim. Actually I haven’t been a member of AMC for a number of years, mostly because it seems they’ve become so quasi-commercial lately. I would guess the IRS leaned on them because they link membership so closely to reduced rates for huts and the like. However I have checked websites of a number of like organizations of which I am member, Mass Audubon, WGBH, Museum of Fine Arts, New England Aquarium, etc., etc, and all say that my memberships are “tax deductible to the full extent provided by the law.” Admittedly that’s a hedge. I’m not trying to pick a fight or anything, its just interesting to me. I would guess that most non-profit organizations represent memberships as fully deductible charitable contributions.

And the paragraph from the IRS publication cited seems to say that with any membership dues under $75, the IRS doesn’t expect you start figuring out what’s for a magazine or what’s for some other direct economic benefit.
I would have no problem with the WCHA telling you that your dues are "tax deductible to the full extent provided by the law" - however I think it would be a big mistake for the WCHA to start interpreting tax law and telling people they can absolutely deduct their dues.

I don't think this language is arbitrary on the part of any of these organizations.

You choose to interpret it as your dues are 100% tax deductable, I do not and neither does my accountant who spends extra time on all my charitable donations every year. We have an overly large amount related to our income and stand to be flagged for audit as a result. We'll spend the better part of an hour detailing each one, so I know it's something he's very careful about. He will be the one representing me to the IRS in the case of audit, so he has a special interest.

Again, I would recommend that anyone interested in deducting their WCHA membership dues to talk with their professional tax advisor and not take any of our statements in this forum - for or against - as a legal interpretation of tax law.

Re your last point, absolutely, I never intended that anything I said should be construed as the equivalent of a “legal” interpretation. I am neither an accountant nor a lawyer. All I have said is based on working in non-profits for 30 years and applying the common sense principle that what’s good for the goose is good for the gander: how I’ve seen it applied and used in a hundred or more non-profits ought to be the way it works in the 101st.
All I can say is that if your going to give away free canoes for a $2000 donation, I am more than willing to let you give away as many of Jerry's canoes that the WCHA can. Thats a great idea that has all my support!
Rollin :D