Wednesday, September 5, 2012

Tax Exemption and Athletic Clubs

Why are athletic clubs like the YMCA tax-exempt charities?  Historically, I guess, the "Y" was considered both an educational organization and an entity whose programs were especially directed at disadvantaged, poor and minority populations.

But is the modern "Y" any different from a for-profit workout facility?  The "downtown Y" is a problem presented in the Fishman and Schwarz casebook I use to teach tax-exempt organizations, and it is a perennial befuddler both for my students and, frankly, me.  

I stumbled across a recent example of this issue via an article in the Arab American News about H.Y.P.E. Athletics (according to the organization's web site, the acronym stands for "Helping Youth Progress and Excel").  This organization appears very "Y"-like, but the city of Dearborn Heights, MI, seems hell-bent on denying property tax exemption to the group (despite its having been recognized as a 501(c)(3) by the IRS). The city apparently is concerned about the $29/month membership fee for adults, though as the article indicates, the fully tax-exempt Detroit-area YMCA charges $59 a month.  I'll let you compare web sites and decide for yourself which you think is more charitable.  The Livonia Family YMCA (which I think is the closest metro-Detroit YMCA facility to Dearborn Heights) website is here.

In my home area of Champaign, IL, the local "Y" recently completed a fabulous new facility on the far west side of town - by the way, about as far as you can get from any minority or disadvantaged population and still be a part of the city of Champaign (there is a bus, the #14 Navy, that runs a whole seven times a day, if I'm reading the Champaign MTD schedule correctly. Good luck getting there if you are coming from the poorer, minority neighborhoods on the north side of town).  Membership is $47 a month, which according to the Y's web site "means more value and flexibility for our members! For example, you can work out in the 9,000 square foot fitness center and then take your family to the indoor pool and water slide. Or, you can take advantage of some of our two facilities' specialized programs, like water aerobics or recreational gymnastics."

Now, I'll freely admit the Y presents a variety of educational programs on health and fitness.  So does the for-profit gym I belong to.  So what, exactly, are the differences between the modern Y and a for-profit athletic facility?  And are the differences that exist (if any) enough to justify calling the Y a tax-exempt charity?  Are the Y's like nonprofit hospitals - organizations that once were clearly charitable, many years ago, but now are simply big businesses delivering a service for a fee?

Tax exempt charity?  Or a "for-profit in disguise"?  You tell me.

JDC 

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