A local health club has approached my local church and offered to provide free health club memberships to all church employees - if the employee wanted to have a family membership, the employee would pay the additional cost beyond a single membership. I am wondering if this is taxable income to the employee and whether there is a citation someone could provide to back that up?

If the health club had offered the free membership to everyone living in a particular neighborhood or to readers of the local newspaper or had simply handed out a flyer with the coupon to everyone leaving your premises, Would you be asking this question ?

Imagine if every coupon or free offer in the newspaper or anywhere else was taxable income.

George --

Not so fast. Although the answer may be as you suggest, your statement comparing this membership (provided to another employer's employees) to a newspaper coupon discount or to a membership offered to a coupon holder or neighborhood member is inapposite. Receiving something for the performance of services--i.e., as a result of work performed--is treated differently and under another set of rules entirely.

For example, the provider of a fringe benefit given to an employee does not have to be that employee's employer, but can be a third-party, and yet the fringe benefit still could be included in income. (Treas. Reg. Section 1.61-21(a)(5).) And, the Code Section which lists excludable fringe benefits specifies that one employer may be considered to have provided a fringe benefit to its own employees even if the benefit is actually provided by another employer (if certain requirements are met). (IRC Section 132(i).)

Remember, the general rule is that anything given as a consequence of an employment relationship is income unless there is a specific exclusion in the Code/Regs. I suspect that a health club membership offered to an unrelated employer's employees (but not generally made avaialble free of charge to the public), depending on its value and depending on the ability to account for usage, may well be includible in income since there is no statutory or regulatory exclusion.

The benefit is not being provided by or through the employer.
There is no vendor relationshiip between the employer and the health club.
The benefit is not for the performance of services.

Free health club membership is not exclusive to only these employees and is made available to others as the OP can attest. Its a standard practice of large health clubs. They, along with many other vendors, have always targeted employee groups, usually larger groups. But churches are targeted although small, so as to gain entry to the larger local congregation.

Don't ask; don't tell.

Sieve

And Yes, I do know about contest prizes, sweepstakes, raffles etc

I'd say "provided by or on behalf of the employer" but otherwise.... ditto. Fails to meet the definition of a fringe benefit, end of analysis.

Actually, George, as the OP I can attest that the entire point of my question was that the free membership is specifically being made available only to employees of the church. Maybe the health club is offering it to some other employers, but I have no clue and that is not the point. From what I understand, the owner of the health club is a member of the church and has approached the directors of the church and wants to make this available to church employees free of charge. I agree it would not be an issue except that the free membership hinges on the employment relationship. Thank you all for your posts!