dissolution of 501 c 7 asset distribution

[Gil Biggie]

Jurisdiction

California

Western Regional Button Asso. is a button collector club. 190 members. 501 c 7 status & Incorporated California - 2007.
If vote by members next month to dissolve , may the treasury of $27,000 be distributed outside of the 189 person membership.
Under the umbrella of mother WRBA, there are 5 states out of the 12 in the stated boundaries that have separate smaller local clubs Not all members of the local state clubs are members of WRBA..
The board is proposing an unequal distribution to the 5 state territory clubs only and remainder to be given to a national organization with similar interest.
Many members object to giving near 20 % of assets to an outside organization. They also do not deem it equitable that 5 states in the boundaries receive a share and remaining Non state affiliated members' share is given to outside organization.distribution.
I have searched all over the net, including IRS site, and cannot find any regulations on distribution of treasury upon dissolution of a 501 c 7.

 

[army judge]

I have searched all over the net, including IRS site, and cannot find any regulations on distribution of treasury upon dissolution of a 501 c 7.

If I were you, I'd obtain permission from the board to spend some of that money to retain legal counsel to make sure no laws are broken by anyone.

The last thing you want to do is ask important questions of strangers.

 

[adjusterjack]

I have searched all over the net, including IRS site, and cannot find any regulations on distribution of treasury upon dissolution of a 501 c 7.

Check back here later and/or tomorrow. One of our members is a tax attorney.

 

[Tax Counsel]

I have searched all over the net, including IRS site, and cannot find any regulations on distribution of treasury upon dissolution of a 501 c 7.

Organizations exempt from tax under IRC § 501(c)(7) are distinctly different from charities exempt under IRC § 501(c)(3). One of the differences is that sale of property by a § 501(c)(7) organization is typically subject to income tax whereas a similar sale by a charity would not. Another is that distributions of assets by a charity upon termination must go to another charity; but that is not required for a § 501(c)(7). Indeed, the club could simply distribute the cash to its members upon termination and not violate the tax law.

The distribution of these funds must, however, be in accordance with the club's charter and bylaws. The club board may want to take those documents to a lawyer who practices in the are of exempt organizations for advice on the distribution plans given that a number of members are upset with the current plan.

 

[zddoodah]

If vote by members next month to dissolve , may the treasury of $27,000 be distributed outside of the 189 person membership.

Since you identified the corporation by name, and since the Articles of Incorporation are a matter of public record, I'm going to suggest that you and the other members of the Board of Directors review those Articles (along with any by-laws that may also exist) very carefully -- in particular, Article X (Dissolution), which reads as follows:



I don't know about you, but this seems abundantly clear as to what you must do upon dissolution. And, if you're not sure what this requires, you and the other members of the Board would be well-advised to retain a local attorney for advice.