Tax Exempt Status For Your Dog Club

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318 – April, 2022

By William Given

Many people think that just creating a nonprofit corporation and conducting business as a nonprofit makes the organization tax-exempt. That is far from the truth. Incorporating a nonprofit in the state of formation merely establishes it as a legal business entity. Having tax-exempt status means that the net profits of the organization are exempt from federal income taxes. Certain states allow state-level tax-exempt status, and in such cases, the net profit is also exempt from payment of state income taxes.

Clubs which have been organized and operate exclusively for pleasure, recreation and other not-for-profit purposes and where no part of the net earnings inures to the benefit of any person, may be tax-exempt for federal income tax purposes. Dog clubs which have been established for a variety of purposes such as promoting an interest in a breed and/or just simply providing a congenial atmosphere for members of the dog fancy to meet and socialize would fall into this category. This tax-exempt status must be applied for and approved by the Internal Revenue Service. Upon approval it relieves the club of the responsibility of paying income taxes.

Dog clubs would generally qualify for tax-exempt status under a special section–Section 501(c)(7)–of the Internal Revenue Code covering social clubs. In order to receive exempt status, it is necessary for the club to file an IRS Form 1024, Application for Recognition of Exemption. The completed application is required along with all required information and supporting documentation. The form itself is quite explicit and is (for the most part) in a question-and-answer format. In answer to specific inquiries, attachments must also be filed with the form, such as: A copy of the club’s articles of incorporation, by-laws, financial statements, the purpose of the club, types of fund-raising activities of the club, qualifications for membership, and so on. The Form 1024 should be completed with great care and all required attachments should accompany the original application as it can dramatically impact the speed of approval (between 2 and 12 months). It is also advisable to obtain some professional guidance in the submission of this form because approval is not automatic. The Internal Revenue Service will review the information submitted by the club, and then will advise the club of the determination and of the annual filing requirement.

Click here to read the complete article
318 – April, 2022

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