Internal Revenue Service
Rev. Rul. 68-432
1968-2 C.B. 104
Criteria to be applied in determining whether payments in the form of
membership dues to an organization described in section 170(c)(2) of the
Code may be in whole or in part deductible as a charitable contribution;
Revenue Ruling 55-565 modified.
Rev. Rul. 68-432
Advice has been requested whether membership fees or subscriptions paid to
a charitable, educational, scientific, or literary organization described
in section 170(c)(2) of the Internal Revenue Code of 1954 in an amount out
of proportion to the benefits or privileges offered may be deducted as
charitable contributions under section 170 of the Code.
In the instant case, an organization of the type described in section
170(c)(2) of the Code maintains and operates a museum and library of art
for the purpose of encouraging and developing the study of the fine arts
and the application of arts in advancing general knowledge.
There are several classes of membership in the organization. Members of all
classes receive equal privileges or benefits in the form of free admission
to poetry evenings and advance exhibitions, reduced rates on subscriptions
for concerts, discounts on the purchase of certain publications and
articles, and invitations to selected lectures and other special events for
Membership in the organization may be divided into two general groups. The
first group consists of Annual and Family memberships for which yearly
membership subscriptions of 2 x and 3 x dollars respectively are required
to be paid. These payments have a reasonable relationship to the monetary
value of the corresponding benefits that thereby become available to the
individual persons or husband and wife teams who thereby acquire a right to
utilize the privileges of such basic memberships.
The second group consists of Sustaining or Fellowship memberships for which
annual subscription payments of 5 x and 20 x dollars respectively are made.
Membership cards will be issued to the subscriber's spouse, if any, without
the payment of anything beyond the basic subscription fee in either of the
two major categories of memberships making up this second group.
Whether payments in the form of membership fees or dues to an organization
described in section 170(c) of the Code are in whole or in part
contributions is a question of fact and will depend on such considerations
as the objectives and activities of the organization and the nature and
extent of the benefits or privileges conferred upon its members. If any
reasonably commensurate return privileges or facilities are made available
by reason of the membership payment, such payment is not a charitable
contribution within the meaning of section 170 of the Code.
In determining whether any valuable return benefits are associated with
such a membership, the test to be applied is whether such privileges are
available and not whether they are in fact utilized. See Revenue Ruling
54-565, C.B. 1954-2, 95, which holds, in effect, that if membership in an
organization bestows benefits or privileges upon members in return for the
payment of the dues, such payment is not a contribution or gift and is not
allowable as a deduction under section 170 of the Code.
If, however, the rights and privileges of membership are incidental to
making the organization function according to its charitable purposes and
the only return benefit thereby obtainable is the satisfaction of
participating in furthering the charitable cause, the membership fee is
considered a contribution toward the support of the organization. See Rev.
Rul. 55-70, C.B. 1955-1, 506. Such privileges as being associated with or
being known as a benefactor of the organization are not significant return
benefits that have a monetary value within the meaning of this Revenue
It is recognized, however, that there may be instances where an
organization may offer a type of membership for an amount substantially
exceeding the value of any benefits or privileges offered. Whenever the
discrepancy between the size of the membership contribution and the
potential monetary benefit is so great as to make it reasonably clear that
the payment is of a dual character, the Internal Revenue Service will give
due consideration to the possible separation on a uniform basis of that
portion of the total payment that may properly be treated as a charitable
contribution under section 170 of the Code.
See Revenue Ruling 67-246, C.B. 1967-2,104, relating to the deductibility,
as charitable contributions, of payments made by taxpayers in connection
with admissions to or other participation in charitable fund-raising
activities such as charity balls, bazaars, etc.
Since in the present case the respective amounts of the yearly fees
required for the Annual and Family memberships are reasonably commensurate
with the overall value of the various benefits associated with such
memberships, no portion of such fees is deductible as a charitable
Since the benefits received by members for the Fellowship or Sustaining
memberships are no greater than those received by members for the Annual or
Family memberships, the respective corresponding excess cost of the
Fellowship or Sustaining memberships is deductible under section 170 of the
Revenue Ruling 54-565 is hereby modified to indicate that the payment of
membership dues to a charitable organization is deductible as a charitable
contribution to the extent such payment exceeds the monetary value of the
benefits and privileges available by reason of such payment.