YMCA required to pay property taxes on club

ax-exempt status

of Y, other entities

targeted by competing

for-profit health clubs

Across the country, for-profit health clubs are not happy with the fact that tax-exempt competitors, especially the YMCA, benefit from tax-exempt status.

In April, the city of Milwaukee, Wis., agreed.

The city determined that a $6.5 million, cutting edge health club located in a local shopping mall should pay nearly $48,000 in annual property taxes, despite the fact that it's owned by the YMCA, according to an April 26 release from the International Health, Racquet & Sportsclub Association.

Milwaukee's tax assessor, Mary Reavy, decided that The Downtown YMCA owes $47,955 for last year's property tax bill.

"Selling fitness services to adults is a commercial activity," said Helen Durkin, director of public policy for IHRSA. "People know at a gut level that real charity is giving to those in need. Selling strawberry smoothies in the juice bar of a $7 million health club expands the definition of a charity beyond recognition."

Durkin expressed confidence in the resolve of Milwaukee city officials to make the decision stick, but said she expects the Y to continue its all-out effort to overturn the decision.

"This is not a free clinic or the local food pantry we're talking about. Nationally, the YMCA collected well over $3 billion in revenue last year, thanks in large part to heavy investment in adult fitness," Durkin said.

"What's at stake here is not only the tax liability of this particular Y, but the very idea that a charity can be taxed if it runs a business. They want to remain completely unfettered in whatever commercial enterprises they choose to engage; our position is if you act like a business, pay taxes like a business."

Durkin said IHRSA expects the Milwaukee decision to boost its national work against competition from tax-exempt organizations.

"Taxpayers subsidize every health club membership a charity sells. With the Milwaukee decision in hand, I believe officials in other communities around the country now have a precedent for taking similar actions," Durkin said.

May 4 IHRSA issued another press release stating its support for changes to the Internal Revenue Code that would dramatically increase the amount of financial and other information tax-exempt organizations disclose to the public.

The recommended change, proposed by the Joint Committee on Taxation, would revise IRS Form 990 and Form 990-T so the public could get "relevant and comprehensive information" about tax-exempt organizations like hospitals, YMCAs and Jewish Community Centers.

"Information regarding the outcome of an audit would assist the public in determining whether the organization is in compliance with the law, and how the organization is using funds," the committee's report states.

IHRSA's Durkin said, "Tighter checks and balances on commercial health clubs that avoid paying taxes are long overdue, and this would really help."

She added, "Building health clubs and selling memberships to affluent adults is not a charitable activity. As tax-exempt organizations increase their business activities, complete public disclosure is vital."

In late January, IHRSA reports, a county property board in Pennsylvania denied The Downtown YMCA in Pittsburgh an application for tax exemption, and in Tennessee, 13 YMCA facilities are in danger of losing their tax-exemption as a result of action by a state board of review.

The full text of the Joint Committee on Taxation's report can be viewed at www.house.gov.jct.