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Art Museum Membership Benefits

  • 1.  Art Museum Membership Benefits

    Posted 13 days ago
    Our University's art museum is looking to set up a membership program. The benefits for this program, I believe, would fall under the normal "Membership Benefits Exception" stated in IRS 1771. However, since this would be our only membership program, and personally my first time dealing with one, I decided to reacquaint myself with the text in 1771. I was surprised to read the following (emphasis mine):

    An annual membership benefit is also considered to be insubstantial if it is provided in exchange for an annual payment of $75 or less and consists of annual recurring rights or privileges

    My recollection was that this was $75 or more (much like the token gift exception for a minimum gift of $56.50 and a combined token item value not exceeding $11.30). So, needless to say, I was surprised. Am I interpreting this correctly?

    Does this mean that a $76+ membership cannot offer...

    • free or discounted admissions to the charitable organization's facilities or events
    • discounts on purchases from the organization's gift shop
    • free or discounted parking
    • free or discounted admission to member-only events sponsored by an organization, where a per-person cost (not including overhead) is within the "low-cost articles" limit
    ...without calculating a fair-market value for those items and deducting it from the gift?

    Thanks.

    Sean

    ------------------------------
    Sean Shappell
    Asst. Vice President, Information Services
    Lehigh University
    ses211@lehigh.edu
    ------------------------------


  • 2.  RE: Art Museum Membership Benefits

    Posted 13 days ago
    You are reading this correctly, Sean.  It is $75 or less.

    Now, if you have a tiered membership and give out qualifying benefits at, say, the $50 level, and then have another level at $100, you can give those $100 members the same benefits you give the $50 without worry.  But any other benefits given beyond those at $50 are subject to standard QPQ rules.

    John

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

    Serving the Advancement Community Since 1987






  • 3.  RE: Art Museum Membership Benefits

    Posted 13 days ago
    John,

    Thanks for the quick reply. That makes a bit more sense. So, if we offer free or discounted admission to member-only events to the $50 level, we are also allowed to offer them to the $76+ levels. However, if there are additional member-only events that you must be in the $76+ level to qualify for, those are subject to QPQ rules. Correct?

    Thanks.

    Sean

    ------------------------------
    Sean Shappell
    Asst. Vice President, Information Services
    Lehigh University
    ses211@lehigh.edu
    ------------------------------



  • 4.  RE: Art Museum Membership Benefits

    Posted 13 days ago
    Well, I am not the IRS but, yes, that's my interpretation and confirmed by Counsel.  Which makes sense.  If you can get something for "free" at the $50 level you should always be able to get it free even if you pay more!

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

    Serving the Advancement Community Since 1987







  • 5.  RE: Art Museum Membership Benefits

    Posted 13 days ago
    John,

    If only you were the IRS, all our lives would be so much easier! But I digress...

    I now have the task of valuing two benefits that are in a bit hard to quantify. They are:

    • Enrollment in the North American Reciprocal Membership (NARM) Program
    • Invitation to private events and discussions with the Director and museum team
    NARM actually offers guidance on their website that states:

    According to the United States Internal Revenue Service (IRS) Pub 1771, a written disclosure statement is required for membership benefits provided in exchange
    for an annual payment of $76 or more (page 6).While NARM benefits are offered at the $100 level and above, a disclosure statement is not required "where there is
    no donative element involved in a particular transaction, such as in a typical museum gift shop sale" (page 6).
    Based on the advice of Deputy General Counsel at the Smithsonian Institute during the 2011 AMMC conference:
    Insubstantial /Frequently used benefits, such as unlimited admissions (NARM), can be difficult to value and a disclosure statement is not required.
    View the IRS Publication 1771 Charitable Contributions Substantiation and Disclosure Requirement on the IRS website.

    While I am pleased to see them recognize that this an issue that needs to be addressed, and I respect the Deputy General Counsel at the Smithsonian Institute, I am leery to accept advice of this nature that is based in the fact that just because something is difficult to value means we don't have to.

    For the, "Invitation to private events and discussions with the Director and museum team," I am also at a bit of a loss. After talking to the Director, this seems to mostly be walking around a museum with the donor and talking to them. I could make the argument that the Director is willing to, and does do that, for other non-donors for other reasons and therefore the cost is $0. However, I could also make the argument that the only way to guarantee this benefit is the $500 membership level, and therefore the cost is $500.

    These do not seem to be unique situations, especially NARM; they're just not one's I've encountered before. So, I'm hoping someone else already has this figured out. Any advice or guidance from anyone on either of these topics would be appreciated.

    Thanks.

    Sean



    ------------------------------
    Sean Shappell
    Asst. Vice President, Information Services
    Lehigh University
    ses211@lehigh.edu
    ------------------------------