Kelly Bullis: Tax deductions for clubs and organizations

I have a lot of business clients who belong to various clubs and organizations. They all pay dues of some sort. And almost all of them ask me if they can deduct those dues as business deductions. Hey! You don’t get what you don’t ask for.

General rule is… You may not deduct amounts paid for membership in any club organized for business, pleasure, recreation, or other social purpose. The purposes and activities of a club, and not its name, determine whether it is organized for business, pleasure, recreation, or some other social purpose.

Examples of clubs that are organized for business, pleasure, recreation, or some other social purpose include country clubs, golf or athletic clubs, airline clubs, hotel clubs, and clubs operated to provide meals for business-related activities.

There is an exception. The IRS allows business deductions for civic and public service organizations because generally, these clubs are not organized for business, pleasure, recreation, or another social purpose. Instead, they are organized to provide services to the community.

What tips the scale is “principal purpose.” Any club organized for the principal purpose of providing their members access to entertainment facilities and/or activities, would prevent their dues from being a deductible business expense.

Let’s look at some “clubs” that have a stated purpose (in their websites) of helping communities as their main objective. Masons, Kiwanis, Rotarians, and Lions. Their publicly stated purpose helps to qualify dues paid as being deductible business deductions. If you can demonstrate that your organization has a principal purpose of civic and public service, dues you pay should be deductible. Evidence could include articles of incorporation, bylaws, website statement of purpose, etc.

The IRS specifically states that Kiwanis, Lions and Civitans are civic and public service organizations. (Who are “Civitans?” Are there any chapters in Northern Nevada?)

What about Shriners? The IRS does not specifically mention them as an automatic civic and public service organization. What comes to mind when you hear the name “Shriner?” Children’s hospitals! I guess because a bunch of Shriners like to goof off at parades pretending to be clowns, the IRS will not automatically qualify them as a civic and public service organization.

For your dues to be deductible, once you have established the organization qualifies, the dues paid must meet the “ordinary and necessary business purpose” test. For example, belonging to such an organization exposes you and your business to potential new clients/customers.

Have you heard? Proverbs 31:9 says, “Open your mouth, judge righteously, and serve justice to the poor and needy.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.