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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10142
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Friends and I are starting a Fiber Arts Guild. We need to

Customer Question

Friends and I are starting a Fiber Arts Guild. We need to set up a bank account for membership dues. We need a Tax ID # ***** the bank. Should we file as a 501 c7?
Submitted: 6 months ago.
Category: Tax
Expert:  Lane replied 6 months ago.

Hi,

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As always, the best answer is based on your objectives.

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These "social clubs," as the category is called are exempt from federal income tax under IRC 501(a) as organizations described in IRC 501(c)(7) if they are "organized for pleasure, recreation, and other nonprofitable purposes

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Certainly sounds like a good fit.

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The practical effect of the exemption is to allow individuals to join together to provide themselves with recreational or social opportunities on a mutual basis without further tax consequences.

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The idea is that individual member is in substantially the same position as if he or she had spent his or her after-tax income on pleasure or recreation without the intervening organization.

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Hence, the exemption for social clubs operates properly only if the club's income is derived exclusively from members.

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Does this make sense, based on what you're trying to do?

Expert:  Lane replied 6 months ago.

If you are looking to do more than that - for example be educational organization dedicated to nurturing creative discovery, learning and sharing through arts education and artistic development - as one 501(c)(3) fiber artists organization puts it - a 501(c)(3) form may make sense

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The hurdles are much higher (form 1023 to APPLY for tax exempt status) ... but WOULD allow for tax deductible donations to further that educational cause.

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(I provide this just for frame of reference, not as a recommendation)

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If you are not looking to have a charitable, or educational, purpose then 501(c) (7) is what you would want to do.

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This group, for example is a 501(c)(7):

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http://www.taxexemptworld.com/organization.asp?tn=2333814

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THis group, however is a 501(C)(3)

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http://www.potomacfiberartsguild.org/guild/index.shtml

Expert:  Lane replied 6 months ago.

Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit")

I know it takes an extra step, but JustAnswer won’t credit us for the work until you rate.

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Thank you!

Lane

I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986.

Expert:  Lane replied 6 months ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

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Let me know…

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Thanks

Lane