To be exempt under Internal Revenue Code (IRC) section 501(c)(8), a fraternal beneficiary society, order, or association must meet the following requirements: It must have a fraternal purpose. An organization has a fraternal purpose if membership is based on a common tie or the pursuit of a common object. The organization must also have a substantial program of fraternal activities. It must operate under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system. Operating under the lodge system requires, at a minimum, two active entities: (i) a parent organization; and (ii) a subordinate (called a lodge, branch, or the like) chartered by the parent and largely self-governing. It must provide for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents. An organization that provides benefits to some, but not all, of its members may qualify for exemption so long as most of the members are eligible for benefits, and criteria for excluding certain members are reasonable. To be exempt under IRC 501(c)(10), a domestic fraternal society, order, or association must meet the following requirements: It must have a fraternal purpose. An organization has a fraternal purpose if membership is based on a common tie or the pursuit of a common object. The organization must also have a substantial program of fraternal activities. It must operate under the lodge system. Operating under the lodge system requires, at a minimum, two active entities: (i) a parent organization; and (ii) a subordinate organization (called a lodge, branch, or the like) chartered by the parent and largely self-governing. It must not provide for the payment of life, sick, accident, or other benefits to its members. The organization may arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. It must devote its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes. It must be a domestic organization, that is, it must be organized in the United States. To be exempt, a fraternal organization should apply for exemption.
