What Is a 501(c)(7) Corporation?
Alumni groups and fraternal societies are two examples of social clubs that can receive special tax treatment by the IRS. If these organizations are incorporated under the laws of a state and meet federal requirements, they can receive 501(c)(7) corporation status, which conveys tax-exempt, nonprofit status.
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Identification
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A 501(c)(7) corporation is a social club that's granted nonprofit status by the IRS, a special designation that exempts it from some federal taxes. By law, a 501(c)(7) social club must be organized for "pleasure, recreation and other similar nonprofitable purposes."
Features
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An essential feature of a 501(c)(7) corporation is face-to-face interaction. This requirement of personal contact encourages social groups -- such as fraternal societies, country clubs and alumni organizations -- but excludes groups that interact only online.
Considerations
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Another crucial consideration is limited membership. An organization whose membership is open to the public is not allowed tax-exempt status, and no more than 15 percent of its gross income can be derived from public use of the organization's facilities.
Income
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As with all 501(c) corporations, a 501(c)(7) social club cannot generate profits for its owners. The club must derive at least 65 percent of its gross income from membership dues.
Benefits
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The dues paid by members of a 501(c)(7) corporation are tax-deductible. This does not apply, however, to any portion of dues that are used for lobbying or political campaign activities.
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Comments
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robertwz
Jul 10, 2010
Dues to 501(c)7 are NOT tax-deductible as you state above under Benefits. from IRS Pub 557, Page 48-49: "501(c)(7) ..... Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donors federal income tax return."
