What is a 503(c)7
A 501(c)(7) organization is a type of tax-exempt entity under the Internal Revenue Code that is classified as a social club. These organizations are typically formed for recreational, social, or hobby purposes, providing benefits to their members. Examples include country clubs, sports clubs, hobby clubs, and fraternities.
Key Features of a 501(c)7
- Purpose: Must be organized primarily for social and recreational activities.
- Membership-Based: Services and benefits should primarily be for members, not the general public.
- Tax-Exempt Status: Exempt from federal income tax on income related to members but may be taxed on unrelated business income.
Limited Non-Member Income:
At least 65% of income must come from membership dues, fees, and assessments. This is why it’s so important for you to be a member, especially if you come to the club regularly- so the money you spend here counts towards Membership Income.
No more than 35% of income can come from non-member sources (e.g., guest fees, investment income).
Of that 35%, no more than 15% can come from non-traditional income sources (e.g., renting out facilities to the public). The club can ONLY be rented by people who are members. No stranger danger and it keeps us compliant.
Exclusive Member Benefits:
The organization must operate to serve members and their guests. Please refer to the section on membership for the full list of member benefits.
Profits cannot be distributed to members, similar to other nonprofit organizations.
Non-Commercial Activity:
The club should not be operated as a business. Honestly, we don’t. We operate based on our values, making financial choices based on our values over profitability. We also have an active and engaged board that ensures we hold ourselves accountable to those values.