Membership in a social club must be limited. A club that issues corporate memberships is dealing with the general public (the corporation’s employees) and is not exempt. Evidence that a club’s facilities will be open to the general public (persons other than members, their dependents or guests) may cause denial of exemption.  This does not mean, however, that any dealing with outsiders will automatically disqualify a club from exemption.

Example:  A country club regularly holds its golf course open to the general public, charging established green fees that are used to maintain and improve club facilities.  The club does not qualify for exemption under Code section 501(c)(7) because it is engaged in business with the general public.  In addition, income from this activity inures to the benefit of the members by reducing what they must pay to maintain and improve club facilities.