In response to my post in the Flyer thread.
https://www.irs.gov/irm/part7/irm_07-025-007
This specifically lays out the rules surrounding a 501c7. scroll down to Inurnment, 2.fThis is what allows the associate member and race member to be charged differently, this should be expanded to some very basic membership for the trackday group riders because that opens up advertising for us to recruit new members. The Manual is very explicit in what the CMRA can't do as a c7 and they say nothing to prohibit advertising for new membership. This is expounded on by Venable LLP, one of the top 100 law firms in the US that's been around over 100 years, so I'm sure they've dealt with this before.A difference in dues or fees does not result in inurement if there is a reasonable basis for the difference
https://www.venable.com/advertising-...bs-06-03-2008/
1) New Member Advertising
Generally, there is no prohibition against advertising to potential members. Though the Service has not published guidance on this particular issue, through its silence, the Service has indicated that such advertising will not affect a club's tax-exempt status. This is understandable, as any revenue that would be received by new members would generally qualify as membership dues.
https://www.irs.gov/pub/irs-tege/rr58-589.pdf
This confirms advertising that is meant to increase membership through the trackday will not effect the clubs exemption simply because random spectators that aren't riding show up. Although the decision is from the 50s it is still referenced in the current publishing of the Internal Revenue Manual. which is covered in 7.25.7.2.3.2.dA club will not be denied exemption merely because it receives income from the general public, that is, persons other than members and their bona fide guests, or because the general public on occasion is permitted to participate in its affairs, provided such participation is incidental to and in furtherance of its general club purposes and it may not be said that income therefrom is inuring to members.
We look to 7.25.7.5 .2 to see what is allowed and the 3 limits we need to stay under are:{The CMRA can not have} Income from nonmember sources used to reduce the cost of providing services to members. See Rev. Rul. 58–589, 1958–2 C.B. 266. However, see discussion on the extent to which nonmember income is permissible for social clubs.
- Receives 35% of its gross receipts from investments - The organization may maintain its exemption under IRC 501(c)(7).
- Receives no more than 15% of its gross receipts from nonmember use of club facilities and/or services. -the organization may maintain its exemption under section 501(c)(7).
- Receives 35% of its gross receipts from outside its membership and no more than 15% of its gross receipts are derived from nonmember use of club facilities. - the organization may maintain its exemption under IRC 501(c)(7).
So as long we maintain less the the 15/35 we are still exempt, which is why I made the suggestion of adding a checkbox to the gate sheet and slitting the GL line for gate revenue.
So by opening membership to the trackday riders we open ourselves up to advertising without fear of losing exemption, and if the outside revenue that results gets close to the 15/35 barrier we simply split the GL codes so we can legitimately track it if the IRS ever comes knocking. Also keep in mind we are bound by those 15/35 limits regardless of any advertising. If no one ever advertised and we still had spectators and merch sales skyrocket we'd still be at risk of losing exemption if they reached that level. However by adding a TD type membership we allow ourselves to expand, and it doesn't have to be complicated like TV or radio it can simply be the CMRA sending out fliers to cycle gear or forum posting, as long as the intent is to generate new membership. We simply need to keep it focused to increasing membership (the trackday) and not public spectatorship.
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