I am a retired CPA. I had looked at a number of Form 990s of golf clubs. It appears they are reporting their membership dues on line 2 of the Part VIII Statement of Revenue. When I was doing the 990 for my club, I put dues on Line 1. It does not make sense to me to put dues on line 2 under program service revenue since there are no expenses to allocate. Was I correct? (I think most 990s have major errors but who cares since the IRS doesn’t audit golf clubs that often.)
The reporting of membership dues on the Form 990 has always been a problem for people who speak English instead of Tax. The IRS has tried for years to distinguish between dues paid for the general support of an organization for which no specific goods or services are received in return and dues, or that portion of dues which purchase something of value. (See an old Ready Reference Page: “IRS Explains Common Mistakes on Form 990”) Dues which are contributions for public support are reported as membership dues and contributions on line 1 of the Statement of Revenue on the Form 990. Dues, or the portion of dues, that purchase goods or services for the payor are reported as “program service revenue” on line 2. Although the Instructions to the Form 990 try valiantly to explain the distinction, a lot of people read the phrase “membership dues” in English and don’t even bother to look for the Tax definition.
The Form 990 is filed by most of the organizations exempt from federal income taxes, not only 501(c)(3) public charities. It is filed by 501(c)(7) social clubs of all sorts, which don’t normally have a lot of contributions of the type made to charities, and usually get much of their revenue as membership dues.
501(c)(7) social clubs normally do not distinguish, like the National Geographic Society does, between the amount that goes for general support for the organization’s research and education for the public, and the amount that pays for the National Geographic Magazine delivered directly to the members. For most social clubs, the dues purchase the right of access to use the club’s facilities, i.e. to participate in its program with other members, even if there are additional charges for certain specific uses like drinks or a meal afterward a round of golf. The member generally can’t use the facilities for anything without paying the dues. The dues cover the maintenance of the facilities, the staff, administration and overhead, even if those expenses cannot be allocated specifically to individual members or programs.
I don’t think you were correct in putting membership dues for the club on the contribution line because I think those dues buy the ticket for admission. But I agree that I wouldn’t worry about it too much because nobody is likely to go to jail for making that mistake. With a social club, the critical IRS issue is whether at least 65% of the revenue comes from the members, without regard to which line of the Form that revenue is reported on. Membership dues reflect revenue of the kind you want whether they are considered contribution income or program service revenue. I wouldn’t lose any sleep over it. Just remember that English and Tax languages are not necessarily the same, so you may need to go to the Instructions to try to figure out what the words mean to the IRS.