For the purpose of community outreach, our pastor wants to join a couple of local clubs. The board would like to pay his dues, but can this be considered a business expense?

Many ministers belong to local clubs, including fitness and golf clubs. Some churches agree to pay the annual dues or fees to these clubs as a fringe benefit. In some cases, the minister (or church) treats the club dues as a business expense because membership in the club will either contribute to the minister's health or expose the minister and church to the community.

Section 274(a)(3) of the tax code specifies that "no deduction shall be allowed for amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or other social purpose." As a result, dues paid to health and fitness clubs, golf clubs, airline clubs, hotel clubs, and dinner clubs are no longer deductible as a business expense. However, dues paid to professional organizations, such as bar associations and medical associations, and civic or public service organizations, such as Kiwanis, Lions, Rotary, chambers of commerce, and trade associations, are not covered by this prohibition and may qualify as business expenses.