Social clubs have long served as a defining characteristic of American society. While the nature of the hobbies, recreational interests, and other ties that inspire people to bond together continues to change significantly, the social club itself remains. For people wishing to join with others and carry out shared interests in an organized way, the group should understand the tax benefits afforded social clubs. Specifically, Section 501(c)(7) of the Internal Revenue Code provides an exemption from federal income tax if certain requirements are met.
In lawyer David Simon’s call to abolish property tax exemption for “rich” nonprofits, he argues stridently that Illinois property tax exemptions reflect another example of unfair privileges, this time for “wealthy” nonprofits like the University of Chicago and Northwestern University. He thus advocates for granting property tax exemptions only to nonprofits owning property valued at less than a million dollars. His bright-line rule seemingly eliminates the highly problematic political schemes such as those found in PILOTs (“Payments in Lieu of Taxation”) which some state and local governments have adopted. But his commentary ignores the long history of nonprofit tax exemptions, the extensive societal benefits (including both financial and intangible benefits) resulting from such exemptions, and other key policy considerations.
How does a nonprofit organization act? Why through its leaders, of course. But they do not – or at least should not – act without the board’s official approval on major decisions. In other words, the directors collectively “resolve” through their board – as the governing body – that the nonprofit shall take certain action. What do such resolutions look like, and where can they be found?