Mar 6, 2013, 9:47 AM
Post #1 of 2
By Glenn McCarthy
ANOTHER REASON TO HAVE FUN AT YOUR CLUB
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Members Only. It sounds exclusive; it conveys a message where commoners who wish to climb the ladder of success can become part of this exclusive group. Otherwise, commoners are to stay away - that's the message at least. But is there something else underlying that binds a yacht club to Members Only? Oh-yes there is, in the case of tax-exempt yacht clubs.
Most yacht clubs are tax-exempt corporations in the U.S. and many of them--from coast to coast--sit on public land on long-term leases. They have long-term leases on the land from a local government authority and p art of that agreement is that they remain a not-for-profit corporation. If or when a yacht club violates the agreement, most likely, they'll be removed from the land. How hard can it be to remain a tax-exempt organization?
In today's economic climate, yacht clubs are searching for new revenue sources, hosting seminars, relaxing rules to let non-members eat or drink at certain times, open public days, bringing in weddings, flea market s, and more. While these revenue enhancements sound simple, they must be accounted for separately in the yacht club's tax return.
What does the IRS say about this?
A yacht club receives its tax-exempt status under IRC 501(c)(7) as a social club, which is created for the purpose to bring members together to share facilities, socialize, and for camaraderie. Think about it. A yacht club is on an expensive piece of waterfront real estate and if it opens its doors to the public, not paying taxes, how does that compete with a for-profit corporation? The IRS figured this out long ago and made it so non-member revenue is subject to for-profit taxation. As a result, the IRS limits non-member income of 501(c)(7)'s in order to avoid unfair competition. -- Read on: http://www.lmsrf.org/...s/2013_03_LMSuRF.pdf