The gross receipts test is met in any of the following three scenarios depending on the age of the organization. The term "gross receipts" means the total amount received from all sources during the organization's annual accounting period unreduced by costs or expenses. It cannot be filed until after the tax year ends.Ī tax-exempt organization is generally eligible to file Form 990-N if its annual gross receipts are normally $50,000 or less. Form 990-N is due by the 15th day of the 5th month after the close of the organization's tax year. While a copy of the information included in Form 990-N is available to print in TaxSlayer Pro, Form 990-N is only filed electronically, never in paper form. Our experience with the private club sector enables us to provide clubs with insights about how to structure operations, implement recordkeeping practices that comply with the tax law, and properly identify nonmember income, including distinguishing between bona fide guests and nonmembers.As an alternative to filing either Form 990 or Form 990-EZ, a charitable organization may be eligible to file Form 990-N, aka the "e-Postcard", to satisfy its annual reporting requirement. RSM’s private club tax professionals can assist clubs in reviewing their recordkeeping practices and evaluating their compliance with the 15/35 percent limitations. In addition, clubs should periodically monitor their compliance with the 15/35 percent limitations so that adjustments can be made in operations and investments if necessary. All clubs should regularly review their recordkeeping practices to ensure that they are adequately tracking nonmember use of facilities and services (e.g., are members completing Party of Eight forms?). What does this mean for private clubs?Ī tax-exempt social club’s Form 990 clearly and succinctly shows the type and amount of income a social club earns during the year, making the club’s compliance with the 15/35 percent limitations transparent and easy to calculate. Within this limitation, no more than 15 percent of the club’s gross receipts may be derived from the use of the club’s facilities or services by the general public (the “15/35 percent limitations”). Specifically, a private club may receive up to 35 percent of its gross receipts from nonmember sources without jeopardizing its exempt status. Private clubs must also be cautious of a limitation imposed on their ability to receive income from other than their members. Therefore, it is necessary for private clubs to track and report their nonmember income. Section 501(c)(7) says private clubs generally are exempt from federal income tax except to the extent that they have unrelated business taxable income (UBTI)-e.g., investment income and use of the club by nonmembers. To this end, and in furtherance of the IRS’s educational initiatives, some clubs have received letters from the IRS encouraging them to monitor their gross receipts from nonmember sources and to maintain books and records demonstrating continued qualifications for exemption. Among the IRS’s compliance strategies for FY 2019 is a focus on tax-exempt clubs and their investment income, nonmember income and non-filing of Form 990-T, Exempt Organizations Business Tax Return.
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