Rev. Rul. 63-215

Section 4243(b) of the Internal Revenue Code of 1954, as added by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92, effective January 1, 1959, and as amended by Public Law 86-344, C.B. 1959-2, 700, effective November 1, 1959, provides that there shall be exempted from the club dues tax imposed by section 4241 of the Code any amount paid as dues or membership fees or as initiation fees (1) for the construction or reconstruction of any social, athletic, or sporting facility, or (2) for the construction or reconstruction of any capital addition to, or capital improvement of, any such facility, or (3) for furnishings or fixtures required by reason of that construction or reconstruction. The taxes on club dues and initiation fees relate generally to payments made by the members. The exemption must, accordingly, be construed with reference to such payments.

Held , in order for that exemption to apply to an amount paid by a member of a club, it is necessary (1) that, prior to the time of the payment, proper action must have been taken by the club members or by the board or directors of the club to establish a definite project of construction or reconstruction which must not have been begun before January 1, 1959, and (2) that the amount paid by the member must be earmarked by the club at the time of receipt for the construction or reconstruction project.