Country Clubs Are Facing Financial Struggles

The pandemic may be turning into an endemic, but for specific non-profits, the struggle remains. While country club living may seem like a dream to some, running a country club can be a financial challenge, especially if your country club is classified as a non-profit organization.

Country clubs are not required to have a charitable purpose to be considered a non-profit; however, they do have to follow the requirements for social clubs in section 501 {c} (7) of the Internal Revenue Code.

Changing Times Bring Unique Challenges

In the last few years, country clubs have faced special assessments, budgeting issues, aging membership, changes in tax laws, and rising member expectations while navigating the constant changes brought on by COVID. Many country clubs face increased pressure from members about club rules and investments back into the club. The country club board of directors must ensure that the club continues to follow the rules established by the IRS to protect its non-profit status. Unlike businesses, the goal of a non-profit country club cannot be to drive revenue.

Non-Profits Must Follow IRS Rules or Risk Losing Their Status (find source)

The IRS provides a list of exemption requirements for social clubs, including but not limited to:

• The club must provide an opportunity for personal contact among members, and memberships must be limited.
• The club must be supported by the membership fee, dues, and assessments.
• The club's net earnings may not inure to the benefit of any person having a personal and private interest in its activities.
• A social club may receive up to 35 percent of gross income from nonmember sources, with no more than 15 percent of gross from nonmember use of club facilities and services.
• Specific recordkeeping requirements 

According to the IRS, "Failure to keep records that distinguish the types and sources of income and expenses will result in a presumption that all income is unrelated to your exempt purpose and therefore subject to unrelated business income tax." 

It is no wonder that your country club board of directors constantly feels the pressure of walking the tightrope between balancing income and expenses, keeping their members content, and protecting the club's non-profit status! The board of directors needs professional guidance. 

Your Non-Profit Advisor and Partner

The country club board of directors must partner with a CPA firm specializing in non-profit. The Cambaliza McGee LLP team understands financial management's complicated rules and requirements. Our experienced CPA team can help your country club with various types of audits 401k, single audits, and regular audits. We understand the challenges facing country clubs today and in the future; contact us to discuss your specific concerns and let us take the burden off your shoulders.