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Entries in tax exempt (4)


YMCA Tax-Exempt Questioned

The Board of Commissioners in Warren County, Pennsylvania, has asked the Warren County YMCA to provide information verifying that it qualifies as a tax-exempt organization.

Failure to produce this tax-exempt status may mean that the YMCA will be forced to close down for good. The YMCA must also pass the HUP (Hospital Utilization Project v. Commonwealth) within the next 60 days. The test is designed to regulate the requirements that any organization must meet in order to be considered a “purely public charity.”

IHRSA advocates for equal tax-treatment of for profit health clubs and their not-for-profit competition. We will continue to closely monitor this issue.

Click here for more information.


Working to Exempt Health Clubs from Taxation

Earlier this month, the Missouri State Legislature introduced Senate Bill 57 (SB 57), which would allow health clubs to be exempted from state and local taxation.
A similar bill stalled in the Missouri Senate last year, so IHRSA is hard at work to encourage the passage of this legislation and to promote the benefits of daily exercise and healthy living.
Currently, 25 states tax health club services. In 2014, IHRSA fought for sales tax repeals in Iowa and New Jersey in addition to Missouri.
IHRSA will continue to fight for them wherever possible in 2015 and beyond.
IHRSA members are invited to learn more about SB57 at and more about efforts to grow exercise participation by downloading the Industry Leadership Report.

What to do When a $55 Million Rec Center Moves in Next Door

Steve Krum and Wayne Westwood discuss what to do when a $55 million tax-exempt facility moves into your market.

Q: "I manage a club in Wyoming in a town of about 30,000 people. In April 2010 we had a $55 million Recreation Center open and we have lost approximately 25% of our membership. Even though we have been very proactive up to this point by upgrading our facility and defining our fitness niche in our community, it has just been very difficult to compete with a $55 million facility that charges significantly lower membership dues than we do. We are contemplating lowering our dues by $5.00/month. Our normal single membership is now $42, but over 60% of our memberships are classified as corporate which we charge only $37. We are thinking it may make sense to lower the other 40% of our members down to $37. Even though we would lose a little revenue, our hopes are that we will get more people in our doors. Not only have we lost members but our sales are down significantly because of this new facility."

A: I’m sorry to hear you are dealing with this, I too have experienced this twice over the last 8 years. In one of the cases we did what you are thinking, it was tough to reduce existing dues, but in the long run I believe it made us more competitive in the market.

We were also able to get the facility to reduce some of the services that competed with us and we got them to stop an expansion to their weight room. We did that by meeting with them and stressing the negative impact they were having on us. I believe they wanted to avoid any negative press and or feedback.

Wayne Westwood, CCM President 
Comprehensive Club Management  

A: Recreation Centers fall into our category of unfair competition for exactly the reasons you mentioned. Not only do they charge significantly lower membership dues, they seem to have unlimited access to capital and they do not pay some of the taxes that we do as private operators.

However, attempting to compete with them on price is a losing proposition and a vicious cycle. You will never win a price war. Your path of differentiation in your community is the right one. Continue to look to service, staff, programming and member experience as the reason to join your club. 

Partner with some other small businesses in your community to provide additional services that help your members with the biggest commodity in today's world: time. For example, maybe a car wash business can set up in your parking lot and wash member's cars while they work out. Or if you have a nearby restaurant that could post a "member's special" menu with a phone number so someone at the noon hour could get their workout in, then call from your club and it would be ready to go when they arrive.

When competing with low-end clubs, YMCA's, or rec centers, adding value to what you provide is the answer.

Steve Krum, VP of Facilities & GM
Spectrum Clubs


This post is a part of our weekly Best Practices series. We post a new question and answer every Monday morning. If you have a question you'd like our Industry Leaders to answer, submit your question today.


Tax-Exempt Competition: What to do when a YMCA moves in next door

IHRSA's public policy team discusses what to do when a YMCA moves into the neighborhood:

"A local YMCA is going to open next to my club. They are going to offer a weight room to compete with my successful club. Can I sue to stop the development?"

A: A legal challenge to the development of a new YMCA based on unfair competition can be a costly battle without any guarantee for success. The legal principles underpinning such a lawsuit would be based on state law and would therefore vary from state-to-state. A victory at this level would, at best, mean that the Y would be subject to state and local taxes. Oregon and Pennsylvania are the two states in which Ys were required to pay a form of local taxes. Those cases date from the 80s and 90s.

Alternative legal challenges employed more recently involve legal actions aimed at slowing down or halting development of a YMCA by raising procedural issues, such as potential violations of zoning and other local land development ordinances.

Meanwhile, there are at least two strategies that may be more cost-effective than litigation:  

  1. Creating a dialogue within the community to discuss whether the YMCA is right for the community and to demand that any new facility be held accountable for its charitable responsibilities as a tax-exempt fitness center; and 
  2. Focusing the full force of the club’s resources on outperforming the new tax-exempt facility. 

 A brief discussion of each strategy follows. 

Creating a dialogue 

The following is excerpted from IHRSA’s white paper, “Stop Tax Inequity”. For more information, please contact

Ordinary citizens, small business owners, and public officials all have a stake in making sure that tax laws are applied correctly and that organizations in equal circumstances get equal treatment. Otherwise, the country will see more situations like what was proposed a few years ago in the North End of Boston. The YMCA was granted access to public land to build a $40 million tax-exempt facility in an area the Boston Globe noted was already served by 47 taxpaying health clubs. Tax exemption is a powerful tool that tax-exempts use to compete directly with taxpaying businesses for identical customers.  

So what can any of us do to ensure a proper distinction between charity and business? 

  • Support state and federal officials when they ask for better reporting and disclosure on what tax-exempt organizations are actually doing and collecting. 
  • Insist that “community accessibility” standards be observed.
  • Demand that tax-exempts’ services that are priced at commercial levels be treated as business revenues subject to tax.
  • Report apparent violations to state attorneys general and the IRS for review. 

When local officials are considering a construction project for a tax-exempt fitness center, citizens and small business owners should urge officials to examine the operating plan closely. If not, their community will face increased tax pressure.  Land and buildings will go off the tax rolls. New taxpaying fitness clubs will be dissuaded from entering the market, and those already operating can be put out of business. 

Outperforming the new tax-exempt facility

This information was excerpted from “How to Prevail in Competitive Markets: An IHRSA Guide for Health Club Operators,” written by John McCarthy and sponsored by CheckFree. To purchase this publication (in English), visit

Today, in most major metropolitan markets, every commercial fitness facility has 10 to 25 competitive fitness operations within its trading area. This one fact - the intensification of competition - implies that the entire fitness industry has entered a new and more demanding era.  

How can you set your club apart from the competition? Consider the following suggestions. 

  1. Get Fresh. 'Store Blindness' is an affliction that besets everyone who lives or works in the same space, day after day, month after month, year after year. After awhile, we don't notice the worn carpets, the tired colors, the musty smells, the stale coffee, the dirt, the grime, the messy staff rooms, the clutter behind the front desk, etc. But anyone who walks into a club for the first time and sees it with fresh eyes, ears and nostrils will notice these things. Whenever a strong competitor enters the market, it is imperative that clubs undergo a 360-degree examination from the perspective of the first-time visitor. It is imperative to 'get fresh,' i.e., update one's image, so that the experience of being in the club is not an experience that is locked into the 1970's, 80's or 90's. 
  2. Get Connected. 'Connectivity' may be the number one advantage that existing clubs enjoy over powerful, new entrants into the market, so it needs to be leveraged to the hilt. 'Connectivity' refers not only to the relationships between members and staff, but just as importantly, to the relationships among members. 'Connectivity' is the basic reason why some neighborhood restaurants and coffee shops that may have flawed operations succeed year after year. Like those, this business is all about connectivity. 
  3. Get United. Many club owners and managers say they never knew how well they could perform until they were faced with an imminent threat from a new club. Whenever a new competitor announces its entry into your market, you have an opportunity to unite your staff in the pursuit of a higher level of performance and excellence across the board. Smart club managers do this. Not only do they unite their team leaders, but they also unite their smaller teams - front desk, sales, group exercise, and personal training teams - asking all of them to raise their performance to higher levels than ever before. The advantage of such external threats is that they can unite your staff in the pursuit of better performance. In such circumstances, your team - motivated and mobilized - becomes the ultimate asset, the ultimate weapon with which you can win the war. 
  4. Get Serious. This term has two implications. First, whenever a powerful new competitor enters the market, it is no longer 'business as usual.' Both the staff and the members expect to see signs that the ownership and management of the company will step up to the plate and make whatever replacements and/or improvements are necessary to present the strongest possible defense/offense against the new competitor. These replacements/improvements are often items that might otherwise have been delayed for years. Second, 'get serious' implies that this is the time to expunge from the staff any personnel who are not totally on board with a united effort to raise the level of performance to heights never before achieved. 
  5. Get Receptive. Now is the time to ask your staff and your members for their input as to how you can improve the club and better serve your customers. As you do this, leverage your staff members' creativity and passion for the business to the hilt. Invariably, they will think of ways to improve your operation that you might not otherwise conceive of. Some of these items may not cost a dime, but may be worth their weight in gold. Make your staff members feel that their opinions count. Their loyalty and commitment to your business will help it rise to the roof. 
  6. Get Positive. While this is easier said than done, staying loose, positive, confident and bullish on your future is never more important than when your ship is being buffeted by the storms of competition. Your staff needs to feel your drive, your confidence, your commitment and your plan to win. Never grouse, blame, or go negative -either toward your own team or toward your competitors. The moment you complain about a competitor is the moment that bespeaks fear, defensiveness and a lack of confidence. None of these emotions build confidence in those with whom you work. It is in situations such as this that true leadership rises to the top. 
  7. Get Clear. This is the perennial issue of company identity. This is - for almost all club operators - not the time to abandon this identity, whether it be as a family club, an adult fitness center, a low-cost provider or an upscale facility. Rather, this is the time to STRENGTHEN AND CLARIFY that identity. Yes, this is a time for innovation, but optimally, it should be innovation that strengthens your identity rather than betrays, abandons or compromises it. The goal is to add value rather than to retreat - and to play offense, rather than hunker down in a defensive position. 
  8. Get Sharp. In the words of Stephen Covey, 'sharpen the saw.' Invest in sales, service and hospitality training. Help your people 'be all that they can be.' Because of the new market entry, it is likely that at least for awhile, your club's fresh 'leads' will diminish, which means you will need to score a higher 'closing percentage' on those that you do get. Keeping every member also becomes exponentially more important, so it is crucial that your staff's hospitality and service skills be honed to a higher pitch. 
  9. Get Real. Never put your head in the sand and say to anyone that the new competition will not affect you. Every competitor takes a slice of the market. It may be a small, marginal, or temporary slice - but it's still a slice. Maybe it's only 50, 150 or 250 members. But at most clubs, it's that final 10%, 15% or 20% of the members that constitute 100% of a club's profitability. Losing just 10% of the membership can mean losing 100% of your profitability. The stakes are high, and any one competitor can spell the difference between life and death. Take every competitor seriously. 
  10. Get Partnered. Clay Hammer, one of the great consultants to this industry in the 1970's and 1980's, never tired of repeating the phrase 'same bed, same dream.' This was his way of saying that one of the best ways to energize your team to mount an all-out counter-offensive is to create incentives and reward each team member for 'partnering' with you in achieving desired results. As a leader in your company, you don't want to go into battle alone. You want your entire team to be as committed as you are. To achieve this, put some financial incentives on the line, so that when you win, they win, too.