Closing of Saginaw's Venerable Germania Club Stirs Discussion of Tax Issue
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Germania Club started in downtown Saginaw, moved to southern open land where it thrived for a century and a half.
The recent closing of the Germania Club of Saginaw after 154 years ruffled the ultra-conservative feathers of one of my friends.
"If it hadn't have been for so-and-so (a prominent Michigan politician) we would still be able to deduct our dues, xxx@@@$$$%%%," he tiraded.
"Because of xxxx, we have lost an entire industry," the club advocate continued.
I had to agree there is a certain old style charm of private clubs, but I couldn't trace the loss of the tax deduction to the particular politician about which he was voicing his vehement disapproval.
The Germania is the latest in private clubs to bite the dust, as they say. The Bay City Country Club went private last year under management of entrepreneur Art Dore, and appears to be attracting many of the same folks with considerable success.
Germania, founded in 1856, had billed itself as "America's fourth oldest country club," has surrendered its 130 acre manicured grounds to First State Bank, which has not announced plans for the facility.
However, the Saginaw Country Club appears to be alive and well, the Midland Country Club has just opened a luxurious $30 million renovated clubhouse and the Bay City and Saginaw Bay Yacht Clubs are busy and member friendly mainly in the warmer months.
The Saginaw Club in downtown Saginaw was reduced to selling valuable paintings off its walls to shore up its financial status a year or so ago, but it remains an immutable icon of the lumbering era. Its preservation is vital to the soul and the historical heritage of the now so-called "Great Lakes Bay Region."
The question of whether the loss of dues deduction on income tax returns is the cause of the failure of private clubs is one that requires considerable study.
We all know there has been a growing general public disaffection with all kinds of organizations, service clubs, churches, Masonic or other orders, marching and chowder societies, etc., etc.
It may be that a lack of leisure time, rather than a tax deduction, is a major reason for loss of membership of private clubs. Or at least a culprit of equal effect with the tax deduction.
The fact is that modern society, the Internet, video games, and a wide variety of highly engaging pursuits like motorcycles, hunting, watching World Championship Wrestling on television, taking your kid or grandkid to soccer or hockey practice, leaves little time for socializing at the lodge.
We consulted an Internet source called TheTaxDiva.com about the tax situation:
"Like many other enterprises, your business may pay club dues to one or several types of organizations. These dues may or may not be deductible, depending on the type of organization and its purpose."
A closer reading of the law, and the provisions still allowable for deduction, seem to offer some comfort to the carriage trade.
"Your business generally cannot deduct dues paid to a club organized for business, pleasure, recreation or other social purposes. This dis-allowance rule takes in country clubs, golf clubs, business luncheon clubs, athletic clubs, and even airline and hotel clubs.
"However, you can deduct 50 percent of the cost of otherwise allowable business entertainment at a club, even if the dues you pay to the club are nondeductible. For example, if you have dinner with a client at your country club after a substantial and bona fide business discussion, 50 percent of the cost of the dinner is deductible as a business expense."
Aha, the Commies really aren't taking over completely!
The club-dues dis-allowance rule generally doesn't affect dues paid to professional organizations including bar associations and medical associations, or civic or public-service-type organizations, such as the Lions, Kiwanis or Rotary clubs. The dues paid to local business leagues, chambers of commerce and boards of trade also aren't affected. However, an organization isn't exempt from the dis-allowance rule if its principal purpose is to provide entertainment facilities to its members, or to conduct entertainment activities for them."
Finally, keep in mind that even if the general club-dues dis-allowance rule doesn't apply, there's no deduction for dues unless you can show that the amount you pay is an ordinary and necessary business expense.
For more details on the club dues question, or on the status of your other business expenses, please feel free to contact the Tax Diva at Questions@TheTaxDiva.com.
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