Nonprofit Law/starting bank account for my club under my name
I am part of a "committee" of volunteers (actually I am the original founder)who sponsor an annual "get-to-gather" or reunion for friends who grew up in Portland during the '50's/'60's/'70's. This organization is celebrating 27 years now. We pay for everything (mailing, hotel/banquet/entertainment/venues)and charge $35 for atendees. The attendance fee goes to reimburse our "kitty". We want to open a new bank account to put the money in, but have been told that if it is in an individual's name that person will be required to pay taxes as if it were personal income. None of our committee members want to take that risk. We never have more than $5,000 and use this as starter money for the next year. How can we get 501(c)(7) status in our group's name?
You do not need to get 501(c)(7) organization status. Just form an unincorporated association for the social events.
From the IRS online EIN application page
and hitting "begin application" and then on the next screen we hit
"View Additional Types, Including Tax-Exempt and Governmental
Organizations" and then on the next page is a list of different
associations, such as PTA/PTO or School Organization, Social or
Savings Club, Community or Volunteer Group, Sports Teams
(community). I suggest choosing "Community or Volunteer Group
[When we choose Social or Savings Club the next screen has
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* A social club is organized for leisure, recreation, or other
similar non-profitable purposes. Some types of social clubs include
sailing clubs, hiking clubs, art groups, etc.
* A savings club is organized to offer benefits and services to
its members for purposes of saving money on purchases. Some types
of savings clubs include grocery savings clubs, airline/cruise
savings clubs, and home décor savings clubs.
* These groups generally need an EIN for banking purposes or to
satisfy local law.
---End of Excerpt--
Narcotics Anonymous advises affiliates who have obtained an EIN
(Employer Identification Number, also known as the taxpayer
identification number) for banking purposes only:
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Any NA group 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 NA groups
will want to maintain detailed records, including treasurer's
records, bank statements, receipts and any other documentation of
their financial activities. We suggest that NA groups maintain
accurate financial records by using the group record worksheets in
the Group Treasurer's Workbook. The worksheets and other above
mentioned records should be kept for at least five years. Care
should be taken when assigning responsibility for storage of the
records, so that they remain available to the group if needed.
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If you still want to form a 501(c)(7) organization, your organizational document would need to have the proper clauses and then you would need to file returns.
The IRS writes about the 501(c)(7) recreational or social organizations at
note that donations to such organizations are not deductible by the donors. http://www.irs.gov/pub/irs-pdf/p557.pdf
on page 72 - last column "Contributions Deductible" - No
Also such an organization may be granted and be able to maintain exempt status easily only if it does not receive more than 35% of its gross receipts from outside its membership and receives no more than 15% of its gross receipts from nonmember use of club facilities.
Note that, if a corporation, a social club must still file an
annual return. From page 2 of the IRS Instructions to Form 1120,
"Unless exempt under section 501, all domestic corporations ...
must file an income tax return whether or not they have taxable
Harvey Mechanic, Attorney at Law -
P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.