I've perused many forum's and posts (similar to this one:
http://www.dgcoursereview.com/forums/showthread.php?t=75347) and haven't found anything to sufficiently answer my questions regarding tax exempt status' for clubs.
Our plan is to file for a 501c7 exemption. This will allow us to get an EIN (we don't pay any employees), get a bank account and start getting more significant sponsorship from businesses.
We're in the very early stages of club growth but are experiencing it at a rapid pace. We're interested in growing the local tournament scene which requires significant income from local business sponsors, etc...
My concern is the Safe Harbor Guidelines for 501c7 organizations. Is sponsorship from local businesses considered normal "income" for these 35% purposes? (https://www.irs.gov/Charities-&-Non...x-Exempt-Social-Clubs-Effect-on-Exempt-Status)
If so, wouldn't almost any club who hosts tournaments need to file taxes as non-exempt? I find this pretty hard to believe. Lets say we have 50 members (for simplicity). Their dues are, say, $20 annually. That's a total of $1000. Lets say we host small events like doubles and singles that generates ~$500 total for the year. 90% of that should be from club members, so call it $450 club income, $50 outside income. Now lets host 1 big pdga B-tier event with the goal of having $2000 added cash. We'd need to raise sponsorship money to the tune of ~$2000 if we combine that with the club balance of $1500 to purchase all materials for the tourney+payouts. Lets say a conservative 50% of entrants to our tourney are club members and their average entry fee is $35. That's roughly 35x$35 = $1225. Which leaves an additional $1225 from non-members.
In the above example, which would probably be very similar to real life scenario for us, we'd be "moving" ~$6000 through our club annually (assuming no growth). Of that, $2675 would be from members ($1000+$450+$1225) and $3275 from non-member sources ($50+$2000+$1225).
Thus:
Member income = ($2675/$6000) = 44.5%
Non-member income = ($3275/$6000) = 54.5%
Does anyone have any detailed advice for how we should go about this process? Is "sponsorship" income considered normal income for these purposes? If it is, it just doesn't make sense to me how any disc golf club that hosts tournaments can avoid this scenario.
Thanks in advance.
http://www.dgcoursereview.com/forums/showthread.php?t=75347) and haven't found anything to sufficiently answer my questions regarding tax exempt status' for clubs.
Our plan is to file for a 501c7 exemption. This will allow us to get an EIN (we don't pay any employees), get a bank account and start getting more significant sponsorship from businesses.
We're in the very early stages of club growth but are experiencing it at a rapid pace. We're interested in growing the local tournament scene which requires significant income from local business sponsors, etc...
My concern is the Safe Harbor Guidelines for 501c7 organizations. Is sponsorship from local businesses considered normal "income" for these 35% purposes? (https://www.irs.gov/Charities-&-Non...x-Exempt-Social-Clubs-Effect-on-Exempt-Status)
If so, wouldn't almost any club who hosts tournaments need to file taxes as non-exempt? I find this pretty hard to believe. Lets say we have 50 members (for simplicity). Their dues are, say, $20 annually. That's a total of $1000. Lets say we host small events like doubles and singles that generates ~$500 total for the year. 90% of that should be from club members, so call it $450 club income, $50 outside income. Now lets host 1 big pdga B-tier event with the goal of having $2000 added cash. We'd need to raise sponsorship money to the tune of ~$2000 if we combine that with the club balance of $1500 to purchase all materials for the tourney+payouts. Lets say a conservative 50% of entrants to our tourney are club members and their average entry fee is $35. That's roughly 35x$35 = $1225. Which leaves an additional $1225 from non-members.
In the above example, which would probably be very similar to real life scenario for us, we'd be "moving" ~$6000 through our club annually (assuming no growth). Of that, $2675 would be from members ($1000+$450+$1225) and $3275 from non-member sources ($50+$2000+$1225).
Thus:
Member income = ($2675/$6000) = 44.5%
Non-member income = ($3275/$6000) = 54.5%
Does anyone have any detailed advice for how we should go about this process? Is "sponsorship" income considered normal income for these purposes? If it is, it just doesn't make sense to me how any disc golf club that hosts tournaments can avoid this scenario.
Thanks in advance.
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