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.
