How did the October 1, 1991 effective date apply to a private club's initiation fees, equity component, installment payments, and operations assessment?

Plain-English summary

Initiation fees assessed to members who joined before October 1, 1991 were nontaxable even when installment payments came after that date. Fees assessed to members joining on or after October 1 were taxable.

The taxable amount included the $3,600 portion of the $16,500 initiation fee that became the member's equity in the organization, whether or not the member gave a note. A $900 operations assessment adopted in 1989 followed the same rule: its treatment depended on when the member joined.

What this means for you

For this transition, Texas used the membership start date rather than the later payment date or the fee's equity label. The same cutoff applied to the operations assessment.

Common questions

Were later payments on a pre-October membership taxable? No. Were fees for members joining on or after October 1 taxable? Yes. Was the equity portion excluded? No. How was the $900 assessment treated? The member's joining date controlled.

Citations and references

• The letter does not identify a numbered statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1136G13

Original ruling text

October 17, 1991

Dear **:

Thank you for your letter of September 13, 1991, concerning the
taxability of initiation fees and particular assessment for operations.

Initiation fees assessed to members joining before October 1, 1991,
are not taxable even though payments on the initiation fees are made
after October 1, 1991. However, initiation fees assessed to members
joining on or after October 1, 1991, are taxable. The portion of the
initiation fee ($3600 of the $16,500) that will be the member's equity
in the organization is also taxable regardless whether or not
there is a note.

The $900 operations assessment adopted in 1989 will be taxable or
nontaxable in the same manner as the initiation fees based on the
date the member joined the organization.

This opinion is based on the fact presented. If there are additional
or different facts, the opinion may change.

You may call toll free 1-800-252-5555 if you have any questions or
need more information. You may write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division