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Museum Membership Benefits and Tex-Ddeuctibility

  • 1.  Museum Membership Benefits and Tex-Ddeuctibility

    Posted 09-16-2021 01:12 PM

    Hello -

    St. John's College has a campus art gallery (The Mitchell Gallery) that sells memberships.  We have just redone their membership categories and I asked what portion or amount of the membership fee are considered benefits.  I was told there are no benefits extended when joining.

    Here's my conundrum and where I would like your expertise advise:

    1) All Memberships include memberships to NARM (North American Reciprocal Museum Association) which entitles those purchasing memberships at $100 and above access to free entry at members museums.  I also recall that memberships at the $75 level or below with insubstantial benefits such a free entry entry - can extend full tex-duductibility for the membership.  Since, our memberships start at $100 (c condition set by NARM) is a portion of our membership a benefit that must be deducted as non- tax-deductible.  How do you folks with membership program handle this benefit that is not available to those visiting the Museum who do not purchase a mebership?

    2) Our memberships also have "Exclusive" invitations to events and receptions.  At the receptions beverages, food and occassionally alcohol.  The receptions are not paid through a gift from donor but are instead paid for by the Museum's general expense budget.  When I inquired as to an estimate of a per person cost I was told it didn't matter - their budget was covering the expense.  I asked if they could develop some cost per member is beverage and food costs so we could ask the auditors if this was considered a substantial benefit I was again told the benefit was not substantial without any analysis of the numbers.  How would your organization go about finding if these receptions are a substantial or insubstantial benefit?

    I'm inclined to insist upon a nominal benefit of $25 - the difference that between the membership at $75 with free visits and the NARM $100 requirement for benefits.

    Any help would be appreciated.

    Richard West
    St. John's College
    Director of Advancement Services

  • 2.  RE: Museum Membership Benefits and Tex-Ddeuctibility

    Posted 09-16-2021 01:56 PM
    1. You are correct that the IRS has an exemption for certain benefits that can be routinely exercised.  But only if the membership payment is $75 or less.  But further, Publication 526 discusses these benefits in the context of your organization - not access to other organizations.  Here is the exact language:  "Free or discounted admission to the organization's facilities or events,".
    2. It does not matter who is paying for the reception.  What matters is the value of the benefit to the individual.  And if the estimated value exceeds $2 (2% of $100) then it's not "insubstantial."  You must calculate a FMV for each event and subtract that total from the paid amount.  My guess is if there is free food and beverage involved that's going to be around $25 per person per event.  And if you get to bring a guest, then that's multiplied by 2!
    Richard, I could not justify a single penny of the $100 as being tax-deductible.


    John H. Taylor
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987