IRS says certain associate member dues could be UBI.

• Author: Rountree, Mark V.
• Position: Unrelated business income - Brief Article

In two recent rulings, the IRS ruled that dues income received by tax-exempt membership organizations from certain "associate members" was subject to unrelated business income tax (UBIT).

In Letter Ruling (TAM) 9345004, the Service determined that annual dues received by a Sec. 501(c)(6) trade association from certain suppliers designated as "associate members" were in essence advertising payments subject to UBIT. In reaching its conclusion, the IRS found that, other than being able to advertise in the organization's trade and membership journals, the associate members received little or no other benefits (e.g., no right to participate in and control the organization's affairs) for their membership. The Service concluded that the associate members were not "bona fide" members of the organization and that the income derived from their dues payments was subject to UBIT.

In Letter Ruling (TAM) 9416002, the IRS determined that certain annual dues received by a Sec. 501(c)(5) agricultural association from "associate members" were merely payments for access to and participation in the organization's insurance programs. The Service noted that the associate members' rights and privileges differed materially from that of "regular" members; associate members were not permitted to vote on the affairs of the organization or...