Required FilingsĪlthough they are exempt from income taxation, social clubs are generally required to file annual returns of their income and expenses with the Internal Revenue Service. Where a member pays all or part of the charges attributable to nonmembers, a statement signed by the member indicating whether he or she has been or will be reimbursed for such nonmember use and, if so, the amount of the reimbursement.įailure to keep records that distinguish the types and sources of income and expenses will result in a presumption that all income is unrelated to your exempt purpose and therefore subject to unrelated business income tax.The information collected for an event should include: The records should be retained for at least three years from the due date of the organization’s annual return.Ĭlubs that allow nonmembers to use their facilities must collect and maintain certain information. food sales income) and one type of expense from another. The records must distinguish one type of income from another (gambling income vs. Revenue Procedure 71-17 PDF details the recordkeeping requirements for social clubs that conduct activities with nonmembers. This is in addition to the requirement to file an annual exempt organization return. Clubs are also generally taxed on income from investments.Īn exempt organization that has $1,000 or more gross income from an unrelated business must file Form 990-T, Exempt Organization Business Income Tax Return. The fact that income derived from non-members is used by an exempt organization in furthering its exempt purpose (such as expanding the club's facilities) does not change the fact that the income is from an unrelated activity. Under these rules, clubs are generally taxed on income from non-members who are not bona fide guests of members. The Internal Revenue Code provides special rules for calculating the unrelated business taxable income of social clubs that are tax-exempt under section 501(c)(7). Where the permitted levels of nonmember income are exceeded, all facts and circumstances will be considered in determining whether the club continues to qualify for exemption. Within the 35 percent amount, no more than 15 percent of gross receipts may be derived from nonmember use of club facilities and services.
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