For for-profit fitness facilities, now is a better time to take on the tax-exempt status of nonprofits than perhaps at anytime in the past, says Helen Durkin, executive vice president of public policy for the International Health, Racquet and Sportsclub Association (IHRSA), the trade association for for-profit health clubs.
Durkin made her comments on Wednesday at the tax-exempt competition forum, which was a part of the IHRSA conference and trade show in San Francisco. Durkin and Tom Richards, senior public policy manager for IHRSA, offered the 25 people at the forum an overview of how the perception of the tax exempt status of nonprofits, such as YMCAs, has changed, particularly since the recession.
During the recession, Durkin has received fewer calls from for-profit club operators asking for assistance fighting nonprofit competitors, she says.
“As the economy slumps…tax-exempt organizations find it harder to fund-raise,” she says.
The challenges to challenging nonprofits are still the same, Richards says, including the lack of clarity about the responsibilities of tax-exempt fitness centers and the lack of enforcement of those responsibilities. Perhaps the biggest challenge, he says, is the “apple pie” idea that YMCAs are very American, which means politicians are eager to be associated with the Ys. The public, Richards adds, does not like attacks on the Ys and community centers.
However, the recession has brought with it new opportunities for shining a different light on nonprofits. Because fewer Ys have been built during the recession, for-profit club operators may have opportunities to grow, making people feel that community centers, nonprofit hospital wellness centers and YMCAs are less necessary in the future, Richards says.
The Affordable Care Act has new reporting requirements for tax-exempt hospitals (and their wellness centers), which is drawing the attention of the IRS to those facilities, he says. The focus on these facilities, Richards surmises, will raise awareness of other tax-exempt facilities, too.
City and state government revenue shortages have put plenty of government entities under great strain, Richards says, so some for-profit club operators have pointed out how much revenue is lost from the tax-exempt status of nonprofits and the necessity of ensuring these facilities are meeting their obligations as a nonprofit, Richards says.
Rodney Steven, owner of Genesis Health Clubs, Wichita, KS, has been fighting the tax-exempt status of YMCAs for 10 years. During that time, five Ys have been built in his market, he says. Initially, Steven says he was villainized by the some in the public and by some of the state legislators he spoke to for his stance, but he says that this time last year, the Ys were getting drilled by state legislators about how they earn their nonprofit status and whether they are fulfilling those missions.
“Now is the time to strike,” Steven said during the forum. “The climate has changed drastically. The government needs the money.”
Durkin warns that as states try to find additional revenue, more will look to tax health club memberships. For-profit operators must speak up against this and the possibilities that nonprofits might be exempt from these membership taxes, which would give them another advantage over for-profits, she says.