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 tracy.mcguire@porascw.org 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.
Without knowing PORA’s plans for the operation of a consignment store in its visitors center, I don’t approve of your decision to relocate the Village Store to PORA. Please answer my questions: (1) Will PORA have enough personnel to staff the consignment store? (2) As compared to the Village Store, how much space within the visitors center will PORA provide to the consignment store? (3) As compared to the Village Store, during what time periods will the consignment store be open to the public? (4) Will all the Village Store display cases be moved to PORA? (5) Why did the Rec Centers decide not to operate the Village Store as a consignment store? (6) Has the Governing Board approved the decision to close the Village Store and open a consignment store in PORA?
In response to your questions:
1) Yes, there will be adequate staff.
2) There will be ample space as the “Visitor Center” is being relocated to a different space.
3) Operation hours will not change per the present plan.
4) No, PORA already has some cabinets.
5) The Rec Center doesn’t have personnel required to operate a consignment store currently and needs that space for office operations.
6) The above posted announcement that generated all of these questions IS the Governing Board’s decision.
I appreciate your prompt and responsive answers to my questions. I expected nothing less, and you didn’t disappoint me.
The now former location of the Village Store was in “downtown” SCW. Undoubtedly, the Store sold many SCW club-made craft items to impulse shoppers who, while walking around the RH Johnson Rec. Center for reasons other than shopping, saw an item in the Store display window and entered the Store to make a purchase. Nobody walks to PORA; there will be no impulse shopping there.
Please point out where and how I can obtain the following: (1) Information concerning what efforts, if any, were undertaken by the Board or professional staff to identify locations in SCW, other than the now former Village Store location, to increase space for office operations? (2) The Rec. Center’s agreement with PORA concerning its operation of a Village Consignment Store, including the financial terms of that agreement? .
Susan
Can you confirm exactly how many staff?
Can you confirm how PORA will be reimbursed for their costs and staff costs?
Can you confirm how artists will be paid for their consignments?
I am not a tax wizard but.
I assume that artists that wish to sell their wares either thru PORA or directly to the public independent from their Club will provide their own tools, equipment and materials purchased other than through, or provided by a Club?
I also assume that Clubs that purchase materials as a service and convenience to their members will resell such to their membership at a price that totally reimburses all cost of materials and equipment?
I also assume that the Rec Centers will be totally reimbursed from membership that choose to profit from what is intended to be non profit hobby uses of our facilities?
It would seem to make more sense to have PORA take over the Village Store area. There is ample parking and in an area that is more familiar to craft shoppers. It will have more space than what will be at the PORA building. Why not have a meeting with the crafters to kick around ideas? It seem that every change in SCW is decided by a few people so it ends up as a take it or leave it thing.
What about the Fun in the Sun Pickleball tournament that is held each year. Most participants are from outside the club. SCW Pickleball club generates a lot of outside monies from this. How will that be handled?
How does this all square with the General Manger saying in prior meetings that clubs cannot make items to sell to public and they were strictly social clubs.
IF PORA is going to open a craft store, can the items be produced by the crafts person using RCSCW facilities and equipment?
Thanks to the Governing Board for continuing to work on these issues. A big thanks to PORA for being willing to help.
Still lots of questions:
1) how will craft clubs get money for upkeep, equipment, etc, if no income from Village Store sales?
2) will items still need to be inspected and approved before going to consignment?
3) what about limits on numbers of items a consigner can submit at one time? I envision someone taking in 50 items and not leaving space for other crafters’ work.
4) where does PORA have space for this new store? Do they realize how much space this will take, especially if limits are not set on submissions?
The whole purpose of a club is to be a club, not to be an organization for members to make money.
With your current proposal club members are still allowed to use the club facilities to produce
items to make a profit. In the Wood Club, this is going to extremes. Many members are still
producing items for sale like there is no end. The solution would be to eliminate Village Store type
sales and Craft Fairs. Return the clubs to the purpose that they should be. Definition of a CLUB:
a Congregation of Like-Minded People, Unified for the purpose of Brotherhood related to the Purpose.
NOT TO MAKE MONEY FOR INDIVIDUAL CLUB MEMBERS. Of course, your current proposals will promote members to sell items outside of Sun City West Facilities. This is a matter for the club board members to stop. This will probable will probably never happen since the board members are not functioning as board members
at the present time.
There has been mention of allowing outsiders into Sun City West to participate in the clubs and other venues. Also was mentioned that our member dues could be affected which would be unacceptable.
I hope the Board is not considering these options as this would greatly affect the wonderful environment that we have here now. I know many people are upset with these possibilities.
The identified solutions are not solutions. We are still allowing club members to use club facilities
to produce products for their personal profit. The situation is gone crazy in the Wood Club with
many members producing an extreme amount of products for sale. We need to get the clubs back
to the purpose of what a club is- A CLUB a Congregation of Like-Minded Individuals Unified for the purpose
of the Brotherhood of a Common Goal. The board members of the Wood Club do not see this at the present
time and need to address this situation.
Most of the Village Store displays were bought, paid for, used, and owned by the clubs.
PORA is out for PORA and always has been. Can’t wait to see what they will charge the artists for a consignment fee. Rec center was aware of the tax issues for 20 years and did nothing, don’t blame the store for your mistakes. Clubs will now have no income from any sales, dues will skyrocket and membership numbers will go way down.
My husband and I do not want to see our clubs go public. They were for the community. It’s one thing for golf courses or bowling but not clubs and some of our clubs already have many members and long lists of people wanting to join without enough room to accommodate everyone when the snowbirds are here. We don’t need to invite outsiders in to make matters worse.
The tax problem solutions are good and reasonable however it begs the question how advertising and other revenue will be distributed?
So the clubs are still on their own and will be responsible to file their own taxes without any oversite from the association and that would leave us right back where we are now. In the soup with the IRS.
What if any are the fines from the IRS were levied?
How will members of clubs operating under 501(c)7 be able to sell their crafts in the consignment shop or in a craft fair when there is a restriction in the law (that has been quoted by GM Schwim) that states nothing can be made in the club for commercial sale. The interpretation specified the use of club equipment and materials bought at the club in the restriction. It seems we’re putting the individuals in a financial harm’s way.
Can’t help but wonder if PORA really has any idea what they have gotten themselves into? Do they have the facility and the staff to handle the large number of people who were selling their items through the village store? I am very THANKFUL for their generosity and wish them the BEST LUCK !!!
Like I was saying change can be a good thing, you don’t always have to dig your heels in!!!what will be will be everything always works out in the end, Change is in evitable
Personally, I find it offensive and outrageous that the IRS is going after ‘small fry’ artisans. I guess it takes too much time and brains to go after the uber-wealthy who pay no taxes.
The IRS has rules for “non-profits” If individual Artisans are making a personal gain (income) from their crafts the should be issued a 1099 form and claim it with their tax returns. We don’t want the residents put in jeopardy. The consignment shop idea is a good one.
I can understand that changes had to be made to be in compliance with IRS regulations. However, there should have been no reason that the Village Store couldn’t have become a consignment store just as you are doing with PORA. The village Store has been the center of the Rec area where you would take guests or stop in when you were in the area. PORAs location is not as good as Village Store and it will not get the traffic that the Village Store did. The Village Store has been a landmark for the Rec Center and it’s a disservice to crafters to take that location away.
I am pleased to see that Mr. has moved forward in the right direction to resolve the issues concerning 501 c-7 and other tax matters. The Rules, Regulations and Procedures have been the foundation of our Community and if followed properly were designed to keep us in compliance with legal and tax rules and regulations. The Governing Board has the duty of ensuring that the SCW Management complies with the established policies. It is not their job to try to rewrite the RR&Ps. They need to get with the program.
So it is ok for a person to manafacture goods, uselngrec property, tools building space and resources to sell at pora and pocket pocket the money.?
To Mr. Fogerty who found fault with the Wood Club. Instead on complaining, why not run for a spot on
the board and make changes? Why not run for a spot on the Rec Center board, and make the changes
you think needed? What have you done to help either of theses organizations?
GREETINGS:
To Mr Otto, Wood Club Members, members of other associated
clubs and members of the SCW Recreation Board.
I appreciate your questions and thank you for the opportunity
to respond to your questions.
First, let us look at the word “complaining” which you have accused
me of. The last I was aware of one had the right of free speech in this
country and I have no recollection of this right being revoked.
Therefore, I will continue to voice my opinion and it will always
be backed up by fact, not some rambling unbiased commentary.
Perhaps the suggestion box in the hallway of the Wood Club should
be renamed the COMPLAINT BOX by using your criterion.
Yes, I am expressing my dissatisfaction with the way things are being
run but trying to do it in a positive and constructive manner. Is this
thing of making statements going to go the path of a certain political
party where if any of it’s members challenge the leadership they are
crucified. Or in the founding of our wonderful country if none of
the colonialists expressed dissatisfaction we would be having
tea and crumpets for breakfast I still believe in the right of free
speech but it must be done with responsibility.
A little of my background to bring to light that I do have experience
and knowledge to make these statements.
I have a Bachelor’s and Master’s Degree in Industrial Arts Education and
and Associates Degree in Aircraft Maintenance Technology. Also
have taken many courses in the field at the post graduate level. I have
spent many years in the educational and fabrication field in the relm.
of wood, metal and plastics. I was a Project Manager
for an eight-million-dollar aircraft modification program for the
government of Indonesian. I have been involved in such projects as the
modification of aircraft for King Hussain, Air Force One and the
Presidential Helicopters Have also been on educational advisory
boards and written and had published many magazine articles in
educational and technical publications. I think this gives me
sufficient background in the fields of technology and management to
make comments on the way things are run. As far as what I have done
for the Wood Club. I have been a member of the Wood Club, the Metal
Club for eight years and the Auto Restoration Club for six years.
In the first four years as a member of the Wood Club I was involved
in teaching every Orientation Class, every Tote Box Class and
started teaching Toy Making 101. With the creation of Toy Making 101
I also wrote an instructors guide, a student guide and a resource guide.
How many other instructors have created this much documentation
for the courses that they teach? This was done so to facilitate
anyone else to easily be able to teach the course. For this course
I also created a Toy Making 101 tool kit in the tool room and created
individual instructional kits for each student (the money for funding
the individual instructional kits came out of my own pocket.)
In the past eight years about the only thing I have been doing in the
wood shop is making toys. I think most members can vouch for this
fact. All of my toys are donated to charitable organizations and are
NEVER SOLD. Every year for the past eight years I have donated.
three hundred toys to the wood shop for donation and use in
their toy program. Last year I made twelve hundred toys with my
goal of making one thousand toys a year for ten years or a total
of ten thousand toys. Maybe then I will retire. The funding for this
comes almost mostly out of my own pocket (I just ordered and
received two gallons of finish for two hundred dollars.) The Wood
Club did buy me one board and enough wheels to make ninety toys.
which I donated to a member who disappeared and never completed
any of the toys. When I am making my toys the only thing I basically
use from the wood shop is electricity. I supply out of my own pocket
the wood, the axles, the wheels, the glue, the finish, the drills, the
router bits, the spot facers, the spindles and abrasive’s for the spindle
sander, the finishing equipment and a place to perform
the finishing operation (Stinking up the house is not to cool but I cannot
do it at the Wood Club.). All total this toy operation has cost me
approximately eight thousand dollars out of my own pocket and
eight thousand hours of my time. Twelve hour days are very common
I have written a compressive document for the procedure
of squaring a board done in a logic manner which I used when
I was teaching orientation. I have also written a simplified version of
operation for the CNC Router along with researching and creating a
document describing the correct use of Chip Load for the CNC Router.
Also invented a dynamic nondestructive method for air cutting on the
CNC Router. In relation to what I do for the Wood Club I am signed
up to monitor five times this month. Mr. Otto how many times
are you signed up to monitor. I do this with the maximum of
twelve credits at the present time so monitoring does me no good.
As far as why I do not run for the Wood Shop or Recreation Board
I am way to hard core and members would not like my style of
management. To solve the situation of lack of monitors. I would initiate
a policy that at the very minimum if all the Shop Manager positions
where not filled by Sunday at four PM the shop would not open for the
week. Either you want to be a participating member of the club or stay
on the porch. I would also strictly enforce the club rules which the
current board seems to ignore in many cases. Like the current
president who said “We do not have any rules anymore.”
Another thing is the consideration to the time spent element.
When I take up an endeavor it always seems to be one that I
get totally immersed in. Therefore by joining a board it would
take away from my toy making (My toys have gone all over the world,
eg. the USA, Mexico, Nepal and Central America.) along with my other
volunteer activities.
Thank the Right of Freedom of Speech for allowing me to
express myself.
I wish nothing but the best for the Wood Club, other
Clubs and the Recreational Center.
My desire is to have all clubs operate smoothly and in harmony.
This goal can only be realized if all members cooperate and
abide by the rules and socially accepted behavior.
In conclusion I challenge you, Mr. Otto: to find a representative group
of Wood Club members who put in three hundred plus hours for
club operation and contribute over three hundred dollars of their
own money for the betterment of the club.
Sincerely,
Michael Fogerty
END OF CONVERSATION
Will I be allowed to sell outside of Sun City West? Like an art gallery in Scottsdale or Sedona?
How does that replace the income generated for the club to survive?
Linda,
Membership fees should cover most of the regular needs for the clubs. If there are major capital needs, those would be covered by the Rec Centers.