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501(c)(7) Social Club Tipsheet

Clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private shareholder.  
  
                                                                                                            - Internal Revenue Code Section 501(c)(7)

Tipsheet: 501(c)(7) Social Clubs

Exemption Application
- Form 1024, including Schedule D (current form is dated 9/98)
- $400 for organizations with gross receipts normally $10,000 or less; $850 for larger organizations (Small automatically-revoked organizations seeking reinstatement may be eligible for a reduced fee of $100 under Transitional Relief rules until 12/31/2012)
- Submit fee using Form 8718
- There is no filing deadline for a 501(c)(7) application. 

Annual filing
- Gross receipts normally less than $50,000 - file Form 990-N
- Gross receipts normally less than $200,000 - file Form 990-EZ
- Gross receipts normally more than $200,000 - file Form 990
- Check instructions: an organization's assets can also affect which form must be filed
Caution: An organization that fails to file a required return for three years in a row will have its exempt status automatically revoked.

Basic Rules
- 501(c)(7) social clubs must be organized for pleasure, recreation, and similar nonprofitable purposes
- Generally, social clubs are membership organizations primarily supported by dues, fees, charges or other funds paid by their members.
- Unlike most other types of exempt organizations, social clubs are taxed on all income derived from outside their membership, including investment income
- Advertisements inviting the public to patronize a 501(c)(7)'s facilities are considered evidence of a business (rather than non-profit) purpose.
- 501(c)(7) organizations may not have any written policy which discriminates against any person because of race, color or religion
- Donations are not deductible as charitable contributions
- Larger organizations may be required to disclose that contributions are not deductible in their solicitation materials
- (c)(7)'s cannot qualify for the special low rate non-profit bulk mailing permit

Lobbying/Political
- Lobbying or political activity cannot be the primary purpose of a 501(c)(7) organization
- 501(c)(7)s are permitted to limit their membership based on membership in a political party
- Political expenditures will, in most cases, incur a penalty tax.

Examples
- Bowling leagues
- Hobby clubs
- Travel clubs
- Sports clubs
- Country clubs
- Dinner clubs

Links
Social Clubs IRS webpage summarizing rules for 501(c)(7) organizations
IRS Publication 557, Tax Exempt Status for Your Organization
- There are many Exempt Organizations Continuing Professional Education articles on social clubs.  The best way to access these is through the Exempt Organizations CPE Topical Index.
Compliance Guide for Tax-Exempt Organizations (Other than 501(c)(3) Public Charities and Private Foundations)
Section 7.25.7  of the Internal Revenue Manual

 

 

 

 

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