Expert: Harvey Mechanic - 7/5/2009

Question
Our all terrain vehicle (ATV) club is registered with the State of NH Treasury Department as an incorporated non-profit organization. Currently, we don not have a TIN. We receive Grants from the State of NH Bureau of Trails for expenses incurred for maintenance, materials and permits necessary for trail construction and up keep. Our income, less than $5,000 per year, is derived from membership dues and donations of money and goods. Should we file for 501 c 3, 501 c 7 or none at all?

Answer
If you don't have a TIN it appears that the funds are going into a bank account of another entity and that is not proper or legal. Anyway, it appears that your club may be qualified as a c7 but not a c3. Donations to such an organization are not deductible by the donors.
http://www.irs.gov/irm/part7/ch10s10.html

See www.irs.gov/pub/irs-tege/rr67-139.pdf in which the IRS discusses
a gemological organization and the two options.

However, if you don't sell goods or services for funds you may exist without either status. The IRS explains that, when applying for the Employer Identification Number, the club may check the line for "banking purposes only" and gives the examples, "a bowling league for
depositing dues or an investment club for dividend and interest
reporting)."
http://www.irs.gov/pub/irs-pdf/iss4.pdf on page 4 on the right
column near the bottom

Any entity that acquires an EIN should consider that the IRS
could at some point in time contact them and request valid
financial activity information. This is one reason that groups
will want to maintain detailed records, including treasurer's
records, bank statements, receipts and any other documentation of
their financial activities. The records should be kept for at
least 3 years. Care should be taken when assigning responsibility
for storage of the records, so that they remain available to the
group if needed.  Certainly if the group takes in less than $5000
in a year the IRS would not be concerned.

You can apply for a EIN (TIN) online at the IRS SS-4 site:
www.irs.gov/businesses/small/article/0,,id=102767,00.html

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com