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Are members' dues tax deductible?

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Are members' dues tax deductible?

Our 501(c)(3) organization, chartered to teach, promote, and foster a particular art form, has members who vote for directors and some officers in periodic elections. Members receive a monthly newsletter which covers internal organization news and events such as seminars and shows. They also receive an annual membership directory and some degree of coverage under the organization's general liability insurance. The per-member cost of these services roughly equals the member's dues. Are the members' dues tax deductible?

By deductible, I assume that you mean deductible as a charitable contribution.  Whether dues are contributions or payments for services is an issue on which there is a lot of confusion, according to the IRS.  Dues that are for the general support of the organization, and don’t provide benefits of monetary value to the members, are generally contributions.  Dues that provide specific economic benefits are treated as payments for services.  (See Ready Reference Page: “New Core Form 990 Presents New Look for Nonprofit Finances.”)

Your newsletter, so long as it is not a “commercial” publication including significant advertising or sold to the general public, would not be an economic benefit.  A membership directory, if not sold to the public, would probably also not be an economic benefit.  Coverage under an insurance policy certainly seems to have economic value, and that value (which is not necessarily the same as the cost) would be a payment for a benefit, and not a contribution.  You should notify members of the portion of their dues that does qualify as a charitable contribution.

To the extent that your members are professionals in the craft, or otherwise earn money from their work, the portion that is not a contribution may be deductible as a business expense.  For some of them it may not matter in any significant way how the payment is characterized.

Monday, August 31, 2009

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