Pictured above: PORA officials visit the Village Store
The Rec Centers is happy to announce that solutions have been identified for most of the tax issues related to our 501(c)7 clubs – including the future of the Village Store.
Much of the progress was detailed in the General Manager’s update during the Annual Owner Meeting on June 24. (If you missed the meeting, you can watch it here: https://youtu.be/BY3ze7jlYpY)
Since that meeting, the future of the Village Store has been determined. PORA and its Visitor’s Center will be opening a consignment store, tentatively after Labor Day. The store will deal directly with individual artisans, rather than the clubs themselves – which was the major concern with the Village Store.
IRS regulations for 501(c)7s state: “A social club must be supported by membership fees, dues, and assessments. A section 501(c)(7) organization may receive up to 35 percent of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. No more than 15 percent of the amount 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 nonmember income exceeding these limits, all the facts and circumstances will be considered in determining whether the club continues to qualify for exemption .”
Under these guidelines, the “general public” is defined as anyone not a member of that club. In other words, sales to RCSCW members at craft fairs would be considered sales to the public.
Sun City West has 103 chartered clubs, including three 501(c)3s, and the rest classified as 501(c)7s. About 80 percent are operating within their IRS guidelines. A handful were not in compliance with the tax regulations.
Here is what has been done to date to resolve the issues:
RESOLVED: 3 clubs were selling advertising. That is no longer taking place. Any event or facility advertising would be managed through the Association rather than the clubs.
RESOLVED: 16 clubs selling arts and crafts, with outside income above the allowable 15 percent limit. The Village Store, which inadvertently facilitated this problem by consigning items for the clubs, has been closed. Until yesterday, the future of the store was uncertain. However, PORA has since confirmed they will incorporate a consignment store at their Visitors Center. PORA President Ralph Johnson, Director David Hunter and General Manager Tracy McGuire visited the Village Store on Tuesday to look over the display cases and arrangements in anticipation of opening at their location.
The Rec Centers have been removed from all club craft sales with the store’s closure. All sales through PORA would be between the artists and PORA; the clubs should not be involved. Artists interested in consigning should contact Tracy McGuire at email@example.com or call 623-584-4288 ext. 414.
“I just want to offer a huge thanks to PORA for stepping up and helping us find this solution that resolves our issue and provides benefit to both PORA and the artisans,” said General Manager Bill Schwind.
The Rec Centers will offer some kind of fair as we did in the past with the Arts and Crafts Fairs, but again, sales would be from individual artists, with no revenue flowing through the clubs.
Aside from those resolutions, at least two of the chartered craft clubs are considering changing their tax designation to 501(c)3 as they do an abundance of charitable donations involving their crafts skills.
IN PROGRESS: 3 dance clubs taking in outside revenue for guests in excess of the 15 percent. Rec Centers staff will be meeting with these clubs about their options to reduce the outside revenue or change their club status.
IN PROGRESS: Kiva Bridge Club, similar to the dance clubs, bringing in revenue from outside guests in excess of 15 percent. Kiva has been offered the option of dissolving as a chartered club and a 501(c)7, and renting the facility as some other kind of non-tax-exempt entity. The Kiva membership is considering this option.
As the Governing Board is going on hiatus during the summer and most of the club activities slow down, the Rec Centers will continue to work with those individual clubs whose solutions are still in progress, in hopes of having full compliance by Oct. 1.