(Updates with Tax Court ruling starting in second paragraph.)
Sept. 28 (Bloomberg) -- A portion of National Education Association members’ dues count as circulation income for the union’s magazine, creating a $1.1 million tax bill for the group, the U.S. Tax Court ruled.
The court said in the ruling today that because NEA members had a “right to receive” the magazine, a share of member dues counted as circulation income.
That dues income wiped out a loss from circulation activity that was unavailable to offset taxable revenue from advertising in the magazine, NEA Today, according to the ruling.
As a result, the NEA owed tax of $319,094 for 2001, $444,554 for 2002 and $342,371 for 2003, according to Internal Revenue Service findings in June 2009 that led the teachers union to take its case to the tax court.
NEA maintained that its members didn’t have the right to receive the publication because the union was under no obligation to continue publishing it and because the magazine was available for free on the Internet.
The IRS said NEA members had right to receive the magazine because their dues paid for it.
NEA, based in Washington, has 3.2 million members. The union did not immediately respond to a request for comment today.
--Editors: Jodi Schneider, Jim Rubin.
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