Tax Planning and Compliance for Tax-Exempt Organizations, Fifth Edition 2019 Cumulative Supplement, 5th Edition

CHAPTER 9Social Clubs: § 501(c)(7)

1. § 9.1 Organizational Requirements and Characteristics
   1. *(b) Examples of Qualifying and Nonqualifying Clubs
2. § 9.3 Membership Requirements
3. § 9.4 Revenue Tests
   1. (a) 35/15 Test
   2. (c) Gift Tax for Club Gifts
4. § 9.5 Unrelated Business Income Tax
   1. (c) Nonmember Losses

*p. 190. Add after first complete sentence at top of page:

Face‐to‐face interaction is important for members of a social club. Organizations that do not afford opportunities for this personal contact among members are not entitled to exemption as a social club, even though they may not be organized for profit with no part of their earnings inuring to the benefit of shareholders. The definition of “club” within the meaning of § 501(c)(7) is to be strictly construed and “nontraditional” activities must be de minimus.¹

*p. 190. Add new bullet to second bullet list in Introduction:

• Physical commingling and promotion of fellowship is required. A group functioning through electronic communication was not allowed exemption.²

§ 9.1 Organizational Requirements and Characteristics

*(b) Examples of Qualifying and Nonqualifying Clubs

p. 193. Add examples of nonqualifying social clubs:

In reviewing new rulings, keep in mind the requirement that programs conducted with profit motive that are not in pursuit of recreation and social purposes of members cannot exceed 15 percent of a club's revenue.³ The IRS private letter rulings about social clubs all have a common thread. In particular, some ...