What Should Social and Recreation Clubs Know About Tax Exemption and Form 990 Filing?
- Updated August 14, 2023 - 2.00 PM - Admin, Tax990
The nonprofits operating towards the furtherance of any exempt purposes can avail of the federal tax exemption from the IRS. Depending on their type and primary operational purpose, the IRS classifies the nonprofits under the respective IRC sections.
This article explains how Social and Recreation Clubs can obtain tax-exempt status and what their tax filing requirements are.
Table of Contents
How Does the IRS Define Social and Recreation Clubs?
The IRC Section 501(c)(7) defines Social and Recreation Clubs as organizations that are organized and operated for pleasure, recreation, and other similar nonprofitable purposes.
Generally, the primary purpose of social clubs involves providing benefits to members, including access to social and recreational facilities such as clubhouses, golf courses, and swimming pools.
Some of the common examples of this type of organization include,
- College fraternities and sororities
- Amateur hunting, fishing, tennis, swimming and
- Hobby clubs
- Ethnic clubs
- Yacht clubs
- Community Associations
How Can Social and Recreation Clubs Apply for Tax Exemption?
The Social and Recreation Clubs that seek tax-exempt status under Section 501(c)(7) can submit their request using Form 1024 – Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code.
However, in order to be eligible for obtaining tax-exempt status, the Social and Recreation Clubs must fulfill the following criteria,
The clubs should be supported by membership fees, dues, and assessments.
The membership shouldn’t be discriminating on the basis of race, color, or religion.
None of the activities carried out should be beyond the scope of Section 501(c)(7).
The clubs’ net income shouldn't inure to the benefit of any private individual.
In case the club exceeds safe harbor guidelines for nonmember and investment income, the facts and circumstances must indicate that it is organized primarily for exempt purposes.
The income received by the club from nontraditional sources must be de minimus.
What are the 990 filing Requirements for Social and Recreation Clubs?
Though the 501(c)(7) Social and Recreation Clubs are not subjected to federal income taxes, the IRS requires these organizations to file 990 Series Forms annually for reporting their financial details, activities, and more.
There are different types of 990 forms available.
Social and Recreation Clubs should e-file form 990-N, if their gross receipts value $50,000 or less.
Social and Recreation Clubs should e-file form 990-EZ, if their gross receipts value is less than $200,000 and assets less than $500,000.
Social and Recreation Clubs should File form 990, if their gross receipts value is $200,000 or more (or) assets of $500,000 or more.
When is the Form 990 Deadline for Social and
Generally, the Social and Recreation Clubs are required to file their 990 return by the 15th day of the 5th month after the end of the accounting period they follow.
If these clubs follow the calendar tax year, then the deadline to file 990 forms will be May 15th.
Operating on a Fiscal Tax Year? Find your 990 due date.
If the deadline falls on a Saturday, Sunday, or a Federal Holiday, then the Social and Recreation Clubs must file their 990 return by the next business day.
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