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Question re not-for-profit gun clubs

Discussion in 'Shooting Related Threads' started by claybrdr, Feb 3, 2009.

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  1. claybrdr

    claybrdr Well-Known Member

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    Our club has traditionally opened its skeet, trap and sporting ranges on weekends to the public. Now a member of our Board says we need to stop because the IRS will classify us as a for-profit club and cost us thousands of dollars. He says we can still let the public attend "matches" without jeopardizing our tax status. He also says it makes our insurance premiums "higher". This person is upset at the shotgun sports and is looking for ways to minimize them.

    I hate to see this during a time where I feel we must be more inclusionary, not less. What do other clubs do?
     
  2. wizard!

    wizard! TS Member

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    in 1998 our 501 c 7 club went through an IRS audit. please send me you phone number and a time to call and we can talk about outside non member income and its effect on yuour club status.
    Joe
     
  3. mixer

    mixer Well-Known Member

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    AFAIK, there is a maximum amount of profit a not for profit club can make before you're reclassified as a for profit club. I believe it's around $20k.


    Eric
     
  4. mixer

    mixer Well-Known Member

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    Sportshot,

    ok, as I said it was just what I had heard, not gospel. I may have been confusing the amount with some info about our club insurance premiums based on profits.

    Eric
     
  5. Wingshotgod

    Wingshotgod Member

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    We've had this very discussion and concern. I believe that if your non-member taxable income exceeds 15% you would lose that status.
     
  6. Bob Hawkes

    Bob Hawkes Well-Known Member

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    MAJOR differnces between C3 and C7. Not my field, that's the extent of my input. Bob
     
  7. claybrdr

    claybrdr Well-Known Member

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    Joe, thanks for the offer. I may have our President discuss this with you.

    Keep comments coming please.
     
  8. wolfram

    wolfram Well-Known Member

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    The short answer is you should expand your shooting programs to meet the intrests that you have. Otherwise your club will die. You can easily put any profits back into the ground as club improvements and keep your non-profit status.

    Have a lawyer review your insurance policy and your non-profit status and get a detailed explaination of what you can and cannot do with your club.
     
  9. squirrelkiller

    squirrelkiller TS Member

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    Deleted somehow. Our 501(c)(3) income limit is $20,000. As Bob said above, there are MAJOR differences in 3 & 7.
     
  10. 870

    870 Well-Known Member

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    claybrdr:

    These are real issues if you are 501(c)(7) and are trying to follow the law.

    Sportshot's first post above regarding 501(c)(7)is incorrect, and nonmember income is a very serious concern for those entities. First, if more than 15% of your income is from nonmembers, you face possible loss of exempt status. Not automatic, it is based on facts and circumstances.

    Next, even if you maintain the exempt status, you will likely have to pay unrelated business income tax if you have any significant nonmember income.

    Mixer's post about the often heard rumor that you can only have so much total income is also not true.

    Not many club's worry about this and they never file the tax returns, but if you are asking what the rules are - as opposed to what you can get away with, that is a different story.

    Squirrelkiller:

    Not sure what you are talking about with the $20,000? There is no "income limit" for a non-profit that is defined as a dollar amount. C7s have the nonmember percentage issues, c3s do not.
     
  11. halfmile

    halfmile Well-Known Member

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    We are a 501c3. we sponsor Pheasants Forever, Whitetails Unlimited, Ducks Unlimited, Wild Turkey Federation and a few more that I may have missed.

    We have youth shooting activities and are sponsoring a hunter Safety class.

    We also gave a chunk to the local Wildlife Sanctuary some years back.

    After our last Federal Audit, it was found necessary to issue W2's for the small stipends the Pres, VP, and Treasurer receive. All others above $600 receive 1099's. This is Mechanic, Grounds upkeep, etc.

    We do pay state sales tax based on the volume of sales.

    We throw a million targets a year, are licensed for class B alcohol (beer) and have quite a bit of non member income due to registered shoots and leagues, not to mention hours of open to the public shooting.

    I would think it would be to your advantage to be c3.

    HM
     
  12. squirrelkiller

    squirrelkiller TS Member

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    870. I should of said that are Federal tax filings are drastically decreased if under the $20,000, could be 25 now, income, donation, limit.
     
  13. 870

    870 Well-Known Member

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    squirrelkiller:

    That makes sense, $25,000 average on gross income is the filing threshold for the 990 series returns.
     
  14. Mr Newbius©

    Mr Newbius© TS Member

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    If there are to many non-member shooters coming out to shoot why are they not members and then you will have no problem but will get membership dues income from them?

    Maybe they dont want to join your club because of some reason and that is something you would want to address or maybe your not charging guests enough to make it worth there membership but make them members and you have nothing to worry about.

    Why aint the members?
     
  15. spitter

    spitter Well-Known Member TS Supporters

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    Some good, some not-so-good information here...

    501(c)7s are non-deductible social organization NFPs, 501(c)3s are tax-deductible NFPs and charitable NPs.

    Need a good CPA to chime in here...

    In the fall 2008 issue of the Range Report from the NSSF, a CPA outlined much of the real information - to summarize...

    Investment income in (c)7s is taxable less a $1000 deduction unless specifically set aside for charitable, religious, scientific, literary or education and/or for the preventation of cruelty to children and aminals.

    Income limits - 35% of gross receipts from outside its membership. About 40% of that 35% (actually 15% of total receipts) may be derived from the use of the Club facilities or services by the general public (not members or guests of the members/club).

    Page 6 - article written by Scott Mithcell CPA; scott@melillo-mitchell.com
    (203) 744-3450

    regards to all,

    Jay Spitz
     
  16. Wahoo

    Wahoo TS Member

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    This the wrong place to ask such a question because if you act on an answer that is not correct, you will have endless headaches with the IRS.

    This question should only be posed to your accountant, better still a certified public accountant, or the IRS. If you decide to ask an attorney, make damn sure he is a tax attorney, not just a run-of-the-mill attorney. Tax attorneys have to go to school on tax legislation for an additional year before they can claim that they are a tax attorney and they have continuing education in the subject every year, all year long.

    You may pay $500 or up to $1,200 for an hour's advice but bounce that off of having your club officials spend countless hours every year scrambling to provide the data the IRS will demand and for the inconvenience of having to keep IRS tax records and file IRS papers endlessly.

    Remember that the IRS has collection powers not granted to any other organization at any level and they are said to "Padlock First, Litigate Later" with firms and clubs they think are trying to dodge them.
     
  17. halfmile

    halfmile Well-Known Member

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    If you do not intend for the club to grow, just require membership except on certain days. You can regulate the outside income easily that way.

    If I was on your board I would push for c3 status and try to grow the club.

    Promoting the shooting sports keeps them alive.

    HM
     
  18. 870

    870 Well-Known Member

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    Spitter - that article is correct but is very general and isn't written to point out clearly what the nonmember issues are. Read it closely and you will see that it is not only the investment income that is taxable, but all unrelated business taxable income (less a $1,000 specific deduction). For a c7, unrelated business taxable income means just about any income that comes from other than members and guests.

    Read my first post above, it pretty much says the same thing. I didn't get into the 35% limit since no clubs I work with have much investment income, it's the 15% limit on nonmember income that really comes into play.

    The UBTI rules are very tightly written for c7s, they don't get to use exclusions available to other exempt organizations, such as the trade or business issue of infrequent activities, volunteer labor, etc.
     
  19. Maytag

    Maytag TS Member

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    As a previous director of a gun club, we "discovered" that we were a 501c3 entity for tax purposes, and have been in violation of the tax code for 50 years, as have almost every other 501c3 organization tha I know of. You are limited as to the amount of income derived from outside non-member income. The tax code is very clear and plain. Look it up on the IRS website. Your director is not trying to shut down your shooting, he is trying to protect all of your asses. As directors, you are all personally liable for the direction of the club, and blatently ignoring an IRS regulation is asking for trouble. A CPA set us straight and took the time to explain all of the ramifications by violating c3 rules. Do yourself a favor and don't bash your director; get the facts.
     
  20. Joe Potosky

    Joe Potosky Well-Known Member

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    Where is it written that a not for profit club has to limit it's income?

    I just had a gun club president tell me this a few weeks back, but I've looked through the rules for setting up a not for profit and I don't see it written.

    I did find this.....

    If a tax-exempt organization has in excess of $25,000 in average annual receipts (dues, contributions, interest/investment income), it may be required to file a Form 990 - Return of an Organization Exempt From Income Tax even is there are no taxes due.

    Additionally, no more than 35 percent of a 501 ( c)7 organization's gross receipts, including investment income, may come from outside its membership. If your club exceeds that limit, your tax exempt status may be lost. Investment income earned by a 501 ( c)7 organization is taxable unless it is used for religious, charitable, scientific, literary or educational purposes or for the prevention of cruelty to children or animals.

    http://www.rangeinfo.org/resource_library/resLibDoc.cfm?filename=business/finance/the_tax_man.htm&CAT=Business
     
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