Social Clubs

a,'..11 Department of the Treasury ""11 Internal Revenue Service
IRS Tax Exemnt and Government Entitles
Number: 202326021
Release Date: 6/30/2023
UIL CODE: 501.07-00
CERTIFIED MAIL - Return Receipt Requested Dear
Why we •re sending you this letter
Date:
April3,2023
Taxpayer ID number (tut 4 dlgb):
Form:
Tax oeriods ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
Lut day to file petition with United States
Tax Court:
This is a final determination explaining why your organiz.ation doesn't qualify as an organiz.ation described in Internal Revenue Code (IRC) Section 501(c)(7) for the tax periods above.
In the future, if you believe your organiz.ation qualifies for true-exempt status and would like a determination letter from the Internal Revenue Service, you can request a determination by filing Form 1024, Application for Recognition of Exemption Under Section 501(a), or Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code, (as applicable) and paying the required user fee.
Our adverse determination as to your exempt status was made for the following reasons: Organiz.ations described under IRC Section 501 ( c )(7) are organized and operated for the pleasure and recreation of their members or other non-profitable pmposes and no part of the net earnings inure to the benefit of any private shareholder. You have not established that you are organized and operated exclusively for an exempt pmpose within the meaning ofIRC Section 50l(c)(7). Your primary activity is managing and maintaining property. As a result, you are not operating substantially for pleasure, recreation, or other non-profitable purposes.
Organiz.ations that are not exempt under IRC Section 501 generally are required to file federal income tax returns and pay tax, where applicable. For further instructions, fom1s and information please visit IRS.gov.
What you must do if you disagree with this determination If you want to contest our final determination, you have 90 days from the date this determination letter was mailed to you to file a petition or complaint in one of the three federal courts listed below.
How to file your action for declaratory judgment
If you decide to contest this determination, you can file an action for declaratory judgment under the provisions of Section 7428 of the Code in either:
• The United States Tax Court,
• The United States Court of Federal Claims, or
• The United States District Court for the District of Columbia catalog Number 74808E You must tile a petition or complaint in one of these three courts within 90 days from the date we mailed this deteunination letter to you. You can download a fillable petition or complaint form and get information about tiling at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee with the petition or complaint.
Y 011 can eFile your completed U.S. Tax Court petition by following the instructions and user guides available on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to do so. You may also file your petition at the address below:
United States Tax Court
400 Second Street, NW
Washington, DC 20217 ustaxcourt.gov The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain instructions about how to file your completed complaint electronically. You may also file your complaint at one of the addresses below:
US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20439 uscfc.uscourts.gov
US District Court for the District of Columbia
333 Constitution Avenue, NW
Washington, DC 20001 dcd.uscourts.gov Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under IRC Section 7428.
Information about the ms Taxpayer Advocate Service
The IRS office whose phone number appears at the top of the notice can best address and access your tax information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate Sei:vice (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't working as it should. TAS is an independent organization witbin the IRS that belps taxpayers and protects taxpayer rigbts. Contact your local Taxpayer Advocate Office at:
Or call TAS at 877-777-4778. For more information about TAS and your rigbts under the Taxpayer Bill ofRigbts, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above.
Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to tile an action for declaratory judgment
Where you can find more information
Enclosed are Publication 1, Your Rigbts as a Taxpayer, and Publication 594, The IRS Collection Process, for more comprehensive information. catalog Number 74808E Find tax forms or publications by visiting IRS.gov/forms or calling 800-T AX-FORM (800-829-3676). If you have questions, you can call the person shown at the top of this letter.
If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best time to call, and a copy of this letter.
You may fax your documents to the fax number shown above, using either a fax machine or online fax service.
Protect yourself when sending digital data by understanding the fax service's privacy and security policies.
Keep the original letter for your records.
Enclosures:
Publication 1
Publication 594
Publication 892 cc:
Sincerely, l ~~
~
A. Brinkley
Director, Exempt Organizations Examinations Catalog Number 74808E
• g'_,a Department of the Treasury '111!11 Internal Revenue Service IRS Tax ExemDt and Government Entitles Copy to:
Certified Mall - Return Receipt Requested Dear
Why you 're receiving this letter
Date:
September1,2022
TIUCD8Y9f' ID number:
Form:
Tax oenoos ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
Address:
Manager's con\ilc:t 1momH1UOn:
Name:
10 number:
Telephone:
Response due da\..
We enclosed a copy of our audit report, Form 886-A, Explanation ofltems, explaining that we propose to revoke your tax-exempt status as an organization described in Internal Revenue Code

(IRC) Section 50l(c)(7) lfyouagree If you haven't already, please sign the enclosed Fonn 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter detennining that you aren't an organization described in IRC Section 501(c)(7) for the periods above.
After we issue the :final adverse detemunation letter, we'll announce that your organization is no longer eligible to receive tax deductible contributions under IRC Section 170.
If you disagree
1. Request a meeting or telephone conference with the manager shown at the top of this letter.
2. Send any infonnation you want us to consider.
3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional infonnation as stated in 1 and 2, above, you'll still be able to :file a protest with IRS Appeals Office after the meeting or after we consider the information.
Letter .3618 (Rev. 8-2019)
Catalog Number 34809F
The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status.
Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't apply now that we've issued this letter.
4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities) if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the IRS.
If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals.
Ifwe don't hear from you
If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter.
Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you.
Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.
For additional information
You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676).
If you have questions, you can contact the person shown at the top of this letter.
Enclosures:
Form 886-A
Form 6018
2
Sincerely,
Je,yvy Morrow
Jerry Morrow for Lynn A. Brinkley Acting Director Exempt Organizations Examinations Catalog Number 34809F '
Poun886A
Name of Taxpayer
ISSUE;
Deputmmtoftbe~-lrdnnall\name Semac lanation of Items
Year/Peribd Ended
Whether the ('' " meets the requirements for exemption under Intemal Revenue Code ("IRC") section 501(c)(7).
FACTS: was originally incorporated on . Per the Articles, its purpose is "perfonning and engaging in educational, charitable, and athletic activities and encouraging temperance and morality among its members in the community".
There is no determination ruling for the in the IRS records owns and manages the property at , including a Lodge and several cottages that are "ownedn by certain members for their exclusive use. Property taxes are paid through who charges cottage members for their portion of taxes. rents the lodge out to members and nonmembers for activities such as weddings, meetings, etc. In partnership "With the , sponsors a seasonal series of breakfasts open to the public and for the purpose of subsidizing the upkeep of the Lodge. meetings and activities are limited to planning and implementing property maintenance and property management and does not re~llarly inchu:le many of the cottage owners, many of whom live significant distances from ~ IRC section 501(c)(7) exempts from federal income tax clubs organized for pleasure, recreation, and other non-profitable purposes.
Prior to its amendment in 1976, IRC section 501 (c)(7) required that social clubs be operated exclusively for pleasure, recreation and other nonprofitable purposes. Public Law 94-568 amended the "exclusive" provision to read "substantially' in order to allow an IRC section 501(c)(7) organization to receive up to 35% of its gi-oss receipts, including investment income, from sources outside its membership "Without losing its tax exempt status.
P. L 94-568 amended IRC 501(c)(7) to provide for exemption from federal income tax of clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private shareholder.
Various revenue nilings have defined the requirement for fellowship, commingling, and the sharing of interest and goals including:
De.P!u~ut of dlle Tzeamy. ~~
Revenue Service
Page: -1-
POJ:m886A
Name of Taxpayer
I>epa.dmaltofthe T--,-Intmlal Bname Senice E lanation of Items
• Rev. Rul. 69-635, 1969-2 C.B. 126
• Rev. Rul. 74-30, 1974-1 C.B. 137
• Rev. Rul. 70-32, 1970-1 C.B. 132
• Rev. Rul. 55-716, 1955-2 C.B. 263 (Face-to-Face interaction)
• Rev. Rul. 67-139, 1967-1 C.B. 129 (Mine.rat Society)
• Rev. Rul. 66-179, 1966-1 C.B. 139 (Garden Club) Sc No.or Exhibit
Year /Period Ended
Therefore, an IRC section 501 (c )(7) organization must satisfy the following statutory requirements:
• A chib which may consist of a membership of individuals, the existence of personal contact, commingling, fellowship among members, sharing of active interests amongst members, and sharing goals by members justifying the existence of the organization;
• Organized for pleasure, recreation, and other nonprofitable purposes;
• Substantially all of the activities of which are for such purposes;
• No part of the net earnings inure to the benefit of a private shareholder; and • No written policy discriminating against individuals seeking membership on the basis of race, color, or religion.
GQYERNMENTtS PQSJTIONi
Based upon the facts found during the examination, is not operated exclusively for exempt purposes within the scope of IRC Section 501 ( c)(7) and as a result, it does not qualify foc exemption undei: IRC Section 501(c)(7). primary activity is managing and maintaining the property and not fellowship and commingling related to the stated purpose of the organization and fails the social component of IRC section 501 (c )(7).
Cottages are not open to all member's use and enjoyment, and in fact, membership in appears to be a pro forma. requirement for members to maintain their cottage ownership. This fails the prohibition on inurement in IRC section 501 (c)(7).
We are proposin.,g revocation of your tax-exempt status for tax years ended thmUJ:th and effective . For the vears referenced, has a filing requirement and is responsible for filing the with the Service.
Fo.rm 886-~.+-AJ
Dep~tofthe T~ -~ternal ReveimeSemce
Page: -2-
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Depl.dmmtofthe T--.y-Iota:ml Jlll'ftmlll 5ema, Foan886A E
Name of Taxpayer
TAXPAYER'S POSITION;
Pending
CONCLUSION;
Pending Taxpayer response
Form 886-~.~ lanation of Items Year/Period Boded . D~t fJfthe Treawry-.~te(nal Boenue. Saviee Page:-3-