Quote:
Originally Posted by MysticCat
Well, you did address state (and local) by noting that orgs have to pay sales tax. That's why I addressed that.
As for non-member income, I think the current IRS rules are that no more than 35% of income can come from non-member sources, and no more than 15% can come from non-member use of facilities. These are the "safe harbors" -- a 501(c)(7)'s tax-exempt status is safe if its non-member income doesn't exceed these percentages. Also, the safe harbor doesn't apply if the non-member income is unrelated to regular organization activities that further the organization's purpose (e.g., if the org basically has a business on the side).
The bottom line is that 501(c)(7) orgs are tax-exempt within the meaning of the Internal Revenue Code. As with any tax-exempt organization under any provision of the IRC, there may be limits or exceptions to that general tax exempt status.
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True, there are limits on where the income can flow from. But the line on the 990 for exemption is $1000 of ALL non member income, no matter the mix. It's the ratio of income that can also get you in hot water, which is what the 35%, etc is for. Which has nothing to do with the amount that can be "set aside" as all such income over $1000 can be as ong as it meets the qualifications for same.
And we all do pay sales tax on purchases. Unfortunately, many HCs think "nonprofit" means they don't have to pay sales tax on the rug they bought. The 501 C code is confusing to the general public because the only ones most people hear about are C 3's which are charitable. None of the other are. And tax exempt and tax deductible do not reside with all.
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