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Nonprofit Law/501(c)(7) fundraising

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Question
Hello,

I a member of a very small 501(c)(7) organization (15 people paying $15 a year dues).  We are looking to raise funds to cover our expenses (we are opering in the red right now, and are looking get in the black to support future projects we have in mind).  I understand the 35%/15% rule, but if we report the funds we raise ad inclome on the 990 postcard can we leagally stay a non-profit?  We are not looking for raise huge amount of money, I am talking about $1000 ourside out our annual dues a year would be on the high side.

Answer
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Even though your question is about another type of organization, I will give you some leads.

IRC 501(c)(7) exempts from federal income tax, 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."
http://www.irs.gov/irm/part7/irm_07-025-007.html

That is from the Code section at https://goo.gl/tq3Dsd

Because your dues total only $225, your other activities (what you call projects to "raise funds") would dwarf your dues in amounts and, therefore, your organization could not qualify for 501(c)(7) organization status.  

You did not ask, but when an otherwise qualified 501(c)(7) organization engages in sales of goods or services other than directly to members in traditional activities, then the profits of those sales activities are taxable. 7.25.7.5.1 of IRM.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

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. For me to consider your individual situation and how the law applies, I would need to gather more information.

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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