November 5, 1998 | Read Time: 1 minute
Congress has told the Internal Revenue Service to review its standards to make sure that charities that run health clubs or provide “fitness services” do not unfairly compete with businesses. The demand was placed into an appropriations bill that President Clinton signed into law last month.
“With certain tax-exempt organizations moving away from their core purpose, questions arise as to whether they are engaging in commercial competition with the for-profit sector,” the lawmakers said.
Congress made clear that it did not have a problem with the I.R.S.’s policy toward YMCA’s, YWCA’s, and Jewish community centers that offer “a variety of programs based on community needs, including health and fitness for people of all ages, incomes, and abilities.”
A 1984 ruling by the I.R.S. says that fitness programs run by non-profit groups are charitable activities as long as the organizations serve a broad array of people. Such groups are not liable for the unrelated-business income tax, known as UBIT, that charities must pay on money-making activities that are unrelated to their missions.
But Congress said it wanted the I.R.S. to “review the standards it applies to fitness activities operated by educational and health-care organizations,” although lawmakers were not more specific about the groups they had in mind.
What’s more, Congress directed the Treasury Department to report by April 1 “on the statutory and regulatory changes that may be needed to assure that the health and fitness activities of these organizations substantially further the purposes for which the organization was granted tax exemption and do not constitute unfair competition with private sector, taxable organizations.”
