Senate Bill S4712

                                 
BILL NUMBER: S4712

SPONSOR: FAHY
 
TITLE OF BILL:

An act to amend the tax law, in relation to exempting athletic club
membership dues from a sales tax where such clubs utilize a municipal
parkland

 
PURPOSE:

This bill would exempt membership dues paid to athletic clubs, which
spend a substantial amount on the improvement, operation, and mainte-
nance of athletic facilities located in any part of a municipal park.
Members of the Albany Tennis Club, a 501 (c) (7) not-for-profit corpo-
ration, currently pay sales tax on membership dues. This bill would
exempt membership dues paid to the Albany Tennis Club from sales tax.

 
SUMMARY OF SPECIFIC PROVISIONS:

  Section  1105 (f) (2) requires members of athletic and social clubs to
pay sell-on membership dues if the dues exceed  ten  dollars  ($10)  per
              

year.  This  bill would exempt membership dues from sales tax if member-
ship dues are primarily spent on improving, operating,  and  maintaining
athletic  facilities in a municipal park. The ATC would fall within this
proposed exemption.

 
JUSTIFICATION:

Membership dues paid to a wide variety of athletic and social clubs  are
subject  to  sales  tax where the membership dues exceed ten dollars per
year. Under NYS Tax Law 1101 (d)(13),  athletic  and  social  clubs  are
defined  as  any  club  or  organization  of which a material purpose or
activity is social or athletic. A  common  factor  regarding  the  clubs
whose  membership  dues  are subject to sales tax is the private benefit
conferred by such clubs to their members. According to  the  regulations
of  the  NYS Department of Tax and Finance ("NYSDTF"), sales tax applies
to dues paid to clubs whose benefits inure to members who also have  the
authority to select members, control all the club's activities, and have
a proprietary interest in the club.  20 NYCRR 527.11 (b) (5). Members of
the  Albany  Tennis  Club  ("ATC"),  a 501 (c) (7) not-for-profit corpo-
ration, paid nearly five  thousand  dollars  ($5000)  in  sales  tax  on
membership  dues in the calendar year 2023. The ATC relies on membership
dues to achieve its primary purpose, i.e., the tennis facility's mainte-
nance, repair, and operation.  Sales  tax  directly  impacts  membership
dues,  which  can  be reasonably charged to its members. To maintain and
expand the use of the facility, the ATC attempts  to  keep  member  ship
dues  as low as possible to meet its obligations. The circumstances that
distinguish the ATC from other social and athletic clubs  should  result
in  an exemption for its members from sales tax on membership dues. This
would enable the ATC to keep its dues low enough to encourage  continued
use  of  the  facility  and  help  ensure that it can properly maintain,
repair, and operate the facility. The ATC operates the  tennis  facility
under  a  license  agreement with the City of Albany, which requires the
ATC to maintain and repair the tennis courts.  The  tennis  facility  is
located in and part of an Albany municipal park. This agreement relieves
the City of Albany of the time, expense, and staff resources to perform.
These  activities.  Nearly all the membership dues are dedicated to this
purpose. Any improvements at the facility become  the  property  of  the
City  of  Albany. The license agreement provides a non-exclusive license
to use the facility. Public members are  welcome  to  use  the  facility
subject  to user fees, which are also dedicated to the tennis facility's
maintenance,  repair, and operation. These factors should exempt the ATC
membership from paying sales tax on membership dues. While  the  Depart-
ment of Tax and Finance (NYS DTF) retains discretion to determine wheth-
er  an  organization  is an athletic or social club for which membership
dues are subject to sales tax, the application of such  discretion  does
not  directly  exempt the ATC without an explicit finding. ATC has peti-
tioned the NYS DTF for an exemption. The petition is pending.

 
LEGISLATIVE HISTORY:

2023/24: S8507

 
FISCAL IMPLICATIONS:

Minimal.

 
EFFECTIVE DATE:
Effective immediately.