|1. (Excerpted from
the IRS): "A social club is organized for pleasure, recreation,
and other similar nonprofitable purposes and substantially all of its
activities are for these purposes"
The purpose of the group must be
non-profit. This statement is why the word "non-profit" was
inserted into Article 1 Section 2 of the TAMR Constitution.
2. "The organization will not be
recognized as tax exempt if its charter, bylaws, or other governing
instrument, or any written policy statement contains a provision that
provides for discrimination against any person on the basis of race,
color, or religion."
The organization cannot
discriminate. Article 12 of the TAMR Constitution satisfied this
requirement and illustrates its' commitment to an open organization.
3. "To be exempt, personal contact,
commingling, and fellowship must exist among members. Members
must be bound together by a common objective directed toward pleasure,
recreation, and other nonprofitable purposes. Fellowship need
not be present between each member and every other member of a club if
it constitutes a material part in the life of the organization.
A statewide or nationwide organization that is made up of individual
members, but is divided into local groups, satisfies this requirement
if fellowship constitutes a material part of the life of each local
A primary feature of membership must
be fellowship between members. The TAMR International
Convention, regional conventions, and activities of the Regional
Business Units (RBUs) as well as Divisions constitute the TAMR's
commitment to this requirement.
4. The membership in a social
club must be limited. A social club that issues corporate
membership is dealing with the general public in the form of the
corporation's employees. Corporate members of a club are not the
kind of members contemplated by this statute. Evidence that your
club's facilities will be open to the general public (persons other
than members or their dependants or guests( may cause denial of
exemption. This does not mean, however, than any dealing with
outsiders will automatically deprive a club of exemption.
TAMR services/events cannot be open
to the public; they are for members, families, and guests.
Business entities (corporations, LLCs, sole proprieterships,
partnerships, etc.) may not be members in themselves, as they are
artificial entities. A member must be a living, breathing being.
An individual may, however, be sponsored by a business entity.
Thus Railroad Manufacturers, Inc. cannot be a member, but Billy Bob
Davis, President of Railroad Manufacturers, Inc., for whom Railroad
Manufacturers Inc is paying, can be a member.
5. In general, a club
should be supported solely by membership fees, dues, and assessments.
A 501c7 organization is permitted to receive up to 35% of its gross
receipts, including investment income, from sources outside of its
membership without losing its tax-exempt status. Of the 35%, not
more than 15% of the gross receipts may be derived from use of the
club's facilities or services by the general public or from other
activities not furthering social or recreational purposes for members.
If an organization has outside income that exceeds these limits, all
facts and circumstances will be taken into account in determining
whether the organization qualifies for tax exempt status.
Up to 35% of the total annual TAMR
income can come from sources outside of the membership. This
includes donations from non-members and interest earned on our bank
accounts. However, per IRS Tax Ruling, "the organization may
maintain its exempt status if it can show through facts and
circumstances that 'substantially all' of its activities are for
'pleasure, recreation, and other nonprofitable purposes.'" Thus,
even if the limits are exceeded, the TAMR must only show that all of
its activities were undertaken for its non-profit purpose. It is
therefore EXTREMELY IMPORTANT that every single cent the TAMR spends
is accounted for--this means receipts.
6. No part of the organization's net
earnings may inure to the benefit of any person having a personal and
private interest in the activities of the organization. For
purposes of this requirement, it is not necessary that net earnings be
actually distributed, since even undistributed earnings benefit
members, if reflected by a decrease in membership dues or an increase
in the services the club makes available to its members without a
corresponding increase in dues or other fees paid for club support.
However, fixed fee payments to members who bring new members into the
club are not an inurement of the club's net earnings, if the payments
are reasonable compensation for performance of a necessary
All funds are to benefit the
membership as a whole, not a single member or group of members
disproportionately No member may be paid for services, either by
a direct payment or an indirect payment, such as a reduction in
membership fees or convention fees.
organizations must make their last three annual information returns
and their approved application for recognition of exemption with all
supporting documents available for public inspection. Pursuant
to the Taxpayer Bill of Rights 2, the organization is required to
provide copies of these documents upon request without charge (other
than a reasonable fee for reproduction and copying costs).
Penalties are provided for failure to comply with these requirements.
The TAMR must make information relating
to our 501c7 status and our annual accounting information available
for public inspection.
8. Generally, tax-exempt
organizations must file an annual information return. Tax-exempt
organizations that have annual gross receipts not normally in excess
of $25,000 are not required to file the annual information return.
The TAMR is not required to file IRS
Form 990 unless annual gross income is more than $25,000.
9. Pursuant to the
Omnibus Budget Reconciliation Act of 1987, a notice must be published
with any solicitation for contributions that are not tax deductible.
The TAMR MIUST publish the
following sentence as a separate paragraph, in the same typeface, on
any solicitation for donations or contributions. The sentence
must either be the first sentence in a paragraph or a separate
paragraph in itself. See the link below for complete details, as
well as requirements for telephone solicitations.
"Contributions or gifts to the Teen
Association of Model Railroaders are not deductible as charitable
contributions for Federal income tax purposes."