Incoporation of woodcarving club

[id carver]

Hello all,

I am not sure if this is the proper place to post this but I have a question our club is grappling with.

We have been registered with the state as 501c(3) organization, but it lapsed 4 years ago. Certain members are suggesting we register as a 501c(7). It seems we can fit into both classifications, but the conversations are confusing, with questions about profit, memberships, dues, etc.

Does anybody have a suggestion or has anybody been through this before? What is your advice?

Thanks in advance for your comments.

id carver

[Donna_T]

Hi,
I see that no one else has ventured a suggestion here, so I'll try. Our club has never registered or set up an incorporation. Of all the clubs that I know who have established a tax exempt status, all are a 501(C)3. The 502 (C) 7 cannot have any income derived from any source other than their members--and both cap yearly normal income to be less than $25,000. Do any of your club members have a contact with aa attorney who might give free advice on the benefits of one over another?

Also, you might check out the IRS website for further examples and explanations:

C. SOCIAL CLUBS - IRC 501(c)(7)byJim Langley and Conrad Rosenberg

1. Introduction
Social clubs are exempt from federal income tax under IRC 501(a) as organizations described in IRC 501(c)(7) if they are "organized for pleasure, recreation, and other nonprofitable purposes." They were originally granted exemption from federal income tax in the Revenue Act of 1916. Generally, social clubs are membership organizations primarily supported by dues, fees, charges or other funds paid by their members.
The central purpose of social clubs is to provide benefits to members, including access to social and recreational facilities such as club houses, golf courses, and swimming pools. When such benefits are funded by members, exemption has been justified by Congress on the theory that the members will be in the same position as if they had paid for the benefits directly. The practical effect of the exemption is to allow individuals to join together to provide themselves with recreational or social opportunities on a mutual basis without further tax consequences.

www.irs.gov/charities/nonprofits/article/0,,id=96189,00.html

The IRS website offers several examples of where an organization might fit in the 501 (C) range. I still think the 501 C 3 covers more carving clubs than the 7. You might contact your state and see if you can re-activate a lapsed registration, rather than re-apply for a new one.
Donna_T

[id carver]

Donna,

Thanks for the info. We have been in contact with a CPA for more information. If I may, let me clarify what I learned:

Every non-profit organization (gardening club, hunting club, etc.) which takes in membership fees or collects money from any source must incorporate with the IRS. The idea is to keep organizations from moving and hiding income or money from any source. This prevents collecting money to profit any one person or group.

Rules have changed over the years, and the reporting income levels are much higher. Basically, once an organization files for non-profit status as a 501(c) organization, they do not have to re-file as long as they do not have income over $50,000 and they continue to file form 990 with the IRS yearly. To incorporate with the IRS it is a one-time fee of $300 for 501(c)(3) and $400 for 501(c)(7), which are one-time fees. After that just return the form 990, which is a postcard sent from the IRS yearly. State requirements vary.

Thanks for the comments. Basically, the IRS is not trying to bust anyone as long as they are trying to do their best. But the information I received indicates that the IRS and each state can go after clubs and organizations that raise money, collect dues, or do any fundraising and ask for donations.

I offer this only as a warning to clubs that have never organized or incorporated. I realize the cost is $300-$400, but having the IRS go after a social club or nonprofit organization for a few dollars is a prospect that our club does not want to go through.

Thanks!

Eric Owens

[appliance]

Thanks for providing some food for thought with this post.