Nonprofit Law/member benefits


A 501c3 organization provides each paid member a benefit of a yearly subscription to a commercial quality publication.  The publication accepts advertising, is available to non-members by subscription, and contains informational articles that go beyond the activities of the organization.  The cost of production of the publication is 11.50 per year.  The cost to the organization after advertising is $7 per year.  The subscription price to non-members is $15 per year.  Membership options are $25 per year individual, $35 per year family, $50 per year business, and $500 lifetime.  A lifetime membership includes a lifetime subscription.  In which cases would the benefit be considered to be of substantial value?

As to charitable deductions, see IRS Publication 526 "Charitable
Donations"  which is available at:
and, specifically the donors can read on page 4, first column, "You may be able to deduct membership fees or dues you pay to a qualified organization. However, you can deduct only the amount that is more than the value of the benefits you receive."  Below that appears to be the area that you were concerned with as it has the word "substantial in an exception when "The  organization determines whether the value of an item or benefit is substantial by using Revenue Procedures 90-12 and 92-49 and the inflation adjustment in Revenue Procedure 2010-40.
The first Revenue Procedure is available at
There we see on page 2:
--- Start of Excerpt ---
01 Benefits received in connection with a payment to a charity will be considered
to have insubstantial fair market value for purposes of advising patrons if the
requirements of paragraphs 1 and 2 are met:
1.  The payment occurs in the context of a fund-raising campaign in which the
charity informs patrons how much of their payment is a deductible contribution, and either
2.  (a) The fair market value of all of the benefits received in connection with the
payment, is not more than 2 percent of the payment, or $50, whichever is less, or
    (b) The payment is $25 (adjusted for inflation as described below) or more
and the only benefits received in connection with the payment are token items
(bookmarks, calendars, key chains, mugs, posters, tee shirts, etc.) bearing the
organization's name or logo.  The cost (as opposed to fair market value) of all of the
benefits received by a donor must, in the aggregate, be within the limits established for
'low cost articles' under section 513(h)(2) of the Code
---End of Excerpt---

That section 513(h)(2) is referred to below, on page 3:
--- Start of Excerpt ---
06 For purposes subparagraph (b) of paragraph 2, an item is a 'low cost article'
under section 513(h)(2) of the Code if its cost does not exceed $5, increased for years
after 1987 by a cost-of-living adjustment under section 1(f)(3)
---End of Excerpt---

to $11.50 which is the organization's cost of the publication per year and, therefore, the magazine subscription is "substantial".

The second Revenue Procedure 92-49 is available at and I do not see anything of additional relevance in that. Revenue Procedure 2010-40 is available at and on page 9 we see
--- Start of Excerpt ---
     (1) Low cost article.  For taxable years beginning in 2011, the unrelated business
income of certain exempt organizations under 513(h)(2) does not include a "low cost
article" of $9.70 or less.
---End of Excerpt---
The next year Rev. Proc. 201152 on page 17 has the figure $9.90 for taxable years beginning in 2012.
Then for taxable years beginning in 2013 we see on page 7 that the figure went up to $10.20.

As you provided the cost of $11.50 for the publication per year, therefore, the magazine subscription is "substantial" for purposes of the low-cost article exception.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

Nonprofit Law

All Answers

Answers by Expert:

Ask Experts


Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

©2016 All rights reserved.