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No new tax is ever popular, but country club members look at President Clinton's elimination of the deductibility of club dues like they look at a slice into a water hazard. The Tax Act of 1993 eliminated the old 80 percent deductibility of club memberships, including country clubs, fraternal clubs, business clubs, athletic clubs and even airline travel clubs. Businesses who could give their employees club memberships to use for customers, then write off the dues as a business expense, cannot write off club expenses anymore. (excerpt)
No new tax is ever popular, but country club members look at President Clinton's elimination of the deductibility of club dues like they look at a slice into a water hazard.
The Tax Act of 1993 eliminated the old 80 percent deductibility of club memberships, including country clubs, fraternal clubs, business clubs, athletic clubs and even airline travel clubs. Businesses who could give their employees club memberships to use for customers, then write off the dues as a business expense, cannot write off club expenses anymore.
But area country club managers say either their clubs haven't been affected by the deduction elimination, or the real effects of the elimination won't be apparent until 1995.
"We really haven't seen any change in membership usage out here," said Mike LaValley, manager of Oneida Golf & Riding Club in Green Bay. "We're somewhat anticipating some kind of change, but we haven't seen it yet."
"Members are concerned -- it's a topic of conversation from time to time," said Mike Evarts, manager of North Shore Golf Club in the town of Harrison. "I think we won't really feel the effect until '95. I think people will sit back and assess on how business will go."
Businesses formerly could deduct 80 percent of both business-related club dues and meals and entertainment. The meal/entertainment deduction has been decreased to 50 percent for either 1994 or corporations whose tax years begin after Dec. 31, 1993.
"It certainly has had somewhat of an impact," said Keith Spritz, senior tax manager at Schumaker Romenesko & Associates in Appleton. "If you're talking about the restaurant industry, it probably isn't that big a deal. Country clubs, I would think they would have more of an impact."
But, said Jack Richardson, manager of Oshkosh Country Club, "A lot of members have been discussing it, but really we aren't going to lose anybody. I haven't lost any members because of that, and our membership is up substantially this year."
"For members to belong to a club, they belong for various reasons -- social, business, to belong, to play golf," said Skip Avery, manager of Butte des Morts Country Club in Grand Chute. "The area is real lucky to have the number of private courses it has to meet people's needs.
"The major corporations went through a big transformation in the '80s, when there were some tax changes, and it didn't affect clubs that much. I think there'll always be a little fallout, because you always have small-type businesses. [In] our club, membership is in the member's name, not the corporation's name. So I don't think it'll affect us that much."
Three scenarios seem likely. Some corporations or individuals who are barely able to afford a club membership may use the deduction elimination as an excuse, though it's not the main reason.
Oneida Golf & Riding Club members use the club "at least 25 percent" of the time for business, said LaValley. "I anticipate we'll see some [dropped memberships]. Like anyone else, maybe we'll see a change in the amount of times members will use it."
Other businesses, who use country club memberships for their employees to entertain customers, will see club dues as a cost of doing business, with or without a deduction.
"I think the corporations probably will find a way to make up the difference, for them to still enjoy the privileges they need to entertain their clients," said Evarts. "The people I see who are members of North Shore are very successful in their business."
"We weren't sure what was going to happen," said Richardson. "But with the kind of people that can afford it, a company's not going to take it away even if it costs more."
"Take a look at what a country club does for people," said Spritz. "When businesses join country clubs, they don't join out of the kindness of their hearts -- they see their people mingling and perhaps doing business prospects. For tax dollars, we would never tell someone not to do that."
Some clubs may not be affected at all, because they don't have business or corporate memberships per se, even if business is transacted on the golf course or in the dining room.
"Our corporate membership deals on a personal basis," said Mike Malasch, manager of Riverview Country Club in Appleton. "Whether they're doing business or if they're strictly social, we don't know.
"If it's going to affect anybody, it's going to affect the city clubs [such as the Milwaukee Club or the Madison Club, dining-only clubs]; where corporations have three memberships, they might cut it down to one or two. A lot of people use these clubs for personal purposes only -- a lot of them don't even take it as a tax deduction."
Oshkosh Country Club has experienced a large increase in personal memberships -- perhaps individuals getting memberships in place of their businesses.
"It may have influenced our membership without our even knowing it," said Richardson, whose club offers discounts for corporate memberships for businesses with at least four employees joining the club. "I think a lot of them [businesses] really liked having a tax deduction."
Club managers also don't expect the deduction changes to have much of an impact on the wide range of summertime charity golf tournaments. The charitable portion of tournament fees, beyond greens fees and other event-related expenses, still are deductible.
"They have something a lot of invites don't have in the area, and that's celebrities," said Avery.
"We'll know this summer, when the numbers start coming in" for entrants in the charity tournaments, Evarts said.
Club members have at least one way to get around parts of the deduction changes. Many clubs itemize their bills into membership and meal portions, and the member still can deduct 50 percent of the meal portion as a business expense.
Some area clubs' members sought to pay dues for 1994, or even future years, before last Dec. 31, so they could write off the dues on their 1993 taxes. However, whether the Internal Revenue Service would allow that as a 1993 deduction, or consider it a 1994 expense and thus not deductible, is up to conjecture. Avery said his club didn't recommend it to members, noting, "We're not tax consultants."
LaValley said some Oneida members prepaid, "but we've always had a lot of them do that in the past." Prepayment with a discount has been offered for some time at clubs, before the tax law changes were made.
Ultimately, the deduction elimination could have an unintended effect if club memberships decrease. A "luxury tax" was approved in the early 1990s an high-dollar items, such as luxury boats, cars casting more than $30,000, and other items. Employment in the affected industries, particularly the boating industry, then dropped, as the tax resulted in fewer purchases of the taxed items. The federal government then dropped the tax on covered items except for cars.
Butte des Morts employs 110 people in the summertime. "That's what I think a lot of people need to know," said Avery. "The private club community tries to give back to the community."
"If we can't market ourselves properly to members, downsizing is an option," said Evarts. "Not a desirable option, but still an option."
Copyright ADD, Inc. Apr 26, 1994