Boston - January 17, 2002 - Fitness clubs that pay taxes have new momentum in their public education campaign on tax-exempt health clubs, thanks to a state court in Pennsylvania that upheld a lower court decision to partially revoke the tax-exempt status of a YMCA facility.

"Health clubs that don’t pay taxes will be major targets for us this year," said Helen Durkin, Director of Public Policy for IHRSA, the International Health, Racquet & Sportsclub Association. "We’ll help taxpaying clubs in their local struggles, and we’ll press the IRS and Congress for clearer boundaries between the nonprofit sector and the private sector. The Pennsylvania case is a compelling precedent, and gets the message across that selling fitness services to adults is a commercial activity."

The ruling in Pennsylvania affirms a previous court ruling that subjects 6,519 square-feet of the 80,550 square-foot Sewickley YMCA to taxation, since that part of the facility is unrelated to a charitable mission.

"The Sewickley YMCA offers some charitable services, but its fitness facility competes directly with taxpaying fitness clubs. All you have to do is look at their equipment, class offerings and amenities," said Durkin. "They’re running a business."

In 1997, the Allegheny County Board of Property Assessment, Appeals and Review revoked the Sewickley YMCA’s tax-exempt status dating back to 1993. The Y filed an appeal, and the case went before the Court of Common Pleas of Allegheny County. The Court of Common Pleas reversed part of the earlier decision, and reinstated tax-exempt status to 74,031 square-feet of the Y complex --- the areas of the Y proven to be operating for "purely public charity."

The court did not, however, reinstate tax-exempt status for the Y’s fitness center because "its annual fees are comparable to, and in some cases exceed, those of other health clubs in the Pittsburgh area. It competes directly with those for-profit health clubs in soliciting members." Additionally, "it is only open to paying members, and does not offer scholarships or admit children." The portion of the YMCA leased to another business, the D.T. Watson Rehabilitation Center, was also ruled taxable because "Pennsylvania law is clear that if a charitable organization leases space for profit, the leased property is subject to taxation," according to the court. The most recent decision affirmed that reasoning.

"The common sense definition of charity is giving something to somebody in need. The Sewickley fitness center doesn’t even come close to meeting that threshold," said Durkin. "If you act like a business, the public expects you to pay taxes like a business."

IHRSA represents more than 5,600 taxpaying sport and fitness clubs worldwide. For approximately 20 years it has tracked and studied the aggressive expansion of tax-exempt organizations into the adult fitness market. Visit www.ihrsa.org for more information. (For copies of relevant Sewickley court decisions, contact Kristen Adams at kma@ihrsa.org.)

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