OBTAINING TAX-
EXEMPT STATUS
FOR YOUR CLUB
By Marc Guerra, AMA Chief Financial Officer | amacfo@modelaircraft.org
In my previous Model Aviation article, I covered the fundamental initial steps of applying for the IRS tax-exempt status. In this article, I will be discussing the next steps of the process, which include obtaining your club’s articles of incorporation and state organizing documents. Each state dictates the requirements for obtaining tax-exempt status and the required organizing documents. Most states will require articles of incorporation, bylaws, tax IDs, principal contact name(s), and contact information.
I also previously covered the important steps of gathering any third-party information about your club’s community involvements and activities. A good example of this is local school and community media articles about your club’s hosted events and community involvement.
Applying for your club’s tax-exempt status can initially appear intimidating; however, I found the process to be no more difficult than assembling a modern-day ARF. Similar to assembling an ARF, you begin by planning out the rudimental steps, such as cleaning your workbench and organizing, inventorying, and gathering your tools and supplies.
Required items that are generally needed when applying for tax-exempt status include:
- Bank statements
- Financial activity report statements of revenue and expenditure
- Club officer names and contact information
- Governing board meeting minutes
- Articles of incorporation or other tax-exempt state organizing documents
Most items that are needed when applying for tax-exempt status should be in existence somewhere. I’ve experienced first-hand the challenging “hand-over” process of obtaining organizational historical documents and records. In my experience, the most time-consuming effort is collecting the required information as opposed to creating any required material.
Just like a model airplane build process, there are times that you might get ahead of yourself. I recommend that after obtaining the required above materials, you begin to familiarize yourself with the next steps and your workbench. A good start is viewing some excellent YouTube videos on how to start a non-profit organization. Your local community college will also likely have a community education workshop about starting and operating a non-profit organization.
The next step in the process is to decide between registering a tax-exempt club under Internal Revenue Code (IRC) Section 501(c)(7) or a tax-exempt charity under IRC Section 501(c)(3). Obtaining some knowledge (and language) beforehand will help when going forward.
I shot for the moon and obtained IRC Section 501(c)(3) status for my longtime club 20 years ago. The local water company district and city have us listed as a supported 501(c)(3), which is displayed in their lobbies and in their public media. This status has brought us tremendous clout that club members have experienced first-hand throughout the years. I don’t fly at my longtime club much these days since I now live near the coast; however, they often tell me about the local community support and status that they have received when I do occasionally visit.
I’ve incorporated and obtained tax-exempt status, on both the state and the federal levels, for three local community-based organizations. I found it to be an iterative process, having had nice phone calls with the IRS and those from the state who were very helpful and suggestive when asked.
In my next article, I’ll dive a little further into the process specific to the IRS requirements for obtaining tax-exempt status.
