Tax Issues for Tax-Exempt Social Clubs
Social clubs may be exempt from federal income taxation if they meet the requirements of section 501(c)(7) of the Internal Revenue Code. Although they are generally exempt from tax, social clubs are subject to tax on their unrelated business income-- generally all income from non-members. In addition to being taxed on unrelated income, a social club may lose its exempt status if it receives too much unrelated income.
This chart illustrates the ways in which nonmember income may affect the tax-exempt status of a social or recreational club under Code section 501(c)(7).