Can you explain why we list our membership dues on the line for reporting gifts, grants and contributions on our Form 990 tax return and not on the line for membership dues and assessments? Our foundation members are wondering whether their dues are grants or administrative expenses.
The instructions for the IRS Form 990 make clear that membership dues should be reported on Line 2, entitled membership dues and assessments, only to the extent that the dues buy specific items of economic benefit, such as the National Geographic Magazine received for dues to the National Geographic Society. Dues which provide for the general support of the organization, without specific goods or services of direct economic benefit in return, are considered contributions and should be reported on Line 1.
Many tax return preparers think they understand the English language and routinely report dues on Line 2. They don’t realize that IRS English is a little different and that the IRS has a much narrower definition of the term. It is one of the most frequent errors in Form 990 preparation, the IRS says.
Foundations have been debating for years whether dues are grants or administrative expenses, like dues to a trade association. There is no bright line test that works for all.
Thursday, November 3, 2011
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