Compare 501(c)(3) Charity to 501(c)(7) Social Club

The IRS offers more than a dozen different classifications of tax exempt status.  The most popular by far with 80% of the total is the 501(c)(3) “Qualified charity status.”

Many homeschool organizations may qualify to be 501(c)(3) qualified charities with an educational purpose or 501(c)(7) Social Clubs.

Here’s a comparison of 501(c)(3) “qualified charity” status and 501(c)(7) Social Club.

In general, homeschool co-ops fall under 501(c)(3) “qualified charity” because they have an educational purpose, while homeschool support groups fall under 501(c)(7) Social Club.

501(c)(3) Qualified Charity 501(c)(7) Social Club
Purpose Religious, Educational, Charitable, Scientific, Literary, Pleasure, recreation, social activities
Examples churches, charities, private schools, homeschool co-ops with an educational purpose Fraternities, sororities, country clubs, hobby clubs, homeschool support groups
Requirements No private inurement allowed. Upon dissolution all assets must be distributed to another 501(c)(3) organization. Personal contact, fellowship and co-mingling of members. No private inurement allowed.
Activities Can hold programs, sell services and products as part of their exempt purpose. Can provide meals or services only to members in connection with club activities
Tax deductible donations allowed Yes No
Tax exempt (no taxes on profits) Exempt from Federal income tax unless the organization has unrelated business income Exempt from Federal income tax on income derived from members; other income taxed
Source of Income Membership fees, fees for services, donations, fund raisers, program fees Primarily (65% or more) from membership fees.
Membership Open to public Limited membership and consistent with the purpose of the club.
IRS Application Required? Yes, if gross revenues over $5,000/year. File Form 1023 No. The IRS does not require 501(c)(7) organizations to file an application. They can “self-proclaim” tax exempt status.
Annual IRS Reporting Form 990N, Form 99EZ or Form 990 Form 990N, Form 99EZ or Form 990
Legislative Lobbying permitted? Insubstantial lobbying allowed (less than 20% of total expenses). No endorsement of a candidate. No limit on legislative activity as long as it furthers the exempt purpose

I hope that helps!

Carol Topp, CPA


  1. Dennis Fermaint says:

    You stated “No. The IRS does not require 501(c)(7) organizations to file an application. They can “self-proclaim” tax exempt status.”
    Where can I reference this so I can have it ready if they ask me why I didn’t file a 1024? Is it somewhere in the 557 pub? How do I document that is the reason why I didn’t file one.

    THank you

  2. Carol Topp says:

    I answered that question in another blog post.
    Read it here:

    You won’t find the information on “self declaring” 501c7 Social Club status in IRS Pub 557.
    I asked a question at an IRS webinar and it was answered there.
    Here’s the link to the IRS webinar:

    Carol Topp, CPA

  3. Charles Narh says:

    As a Social Club are we required to file Annually or IRS Reporting.

  4. Carol Topp says:

    Yes, the new-ish requirement (since 2007) from the IRS is that all nonprofits, including 501(c)(7) tax exempt social clubs file the annual information return Form 990/990EZ or 990N.

  5. Jeff Skelding says:

    We are a small wrestling club that practices at a public school building. We are considering filing for non-profit status. A 501c3 sounds like the way we should go, does practicing for free at a public school hurt us. We mainly fundraise to help parents pay for tournaments that their children attend weekly during season. There are no paid coaches or administrators.

  6. Carol Topp says:

    Most youth sports organizations qualify for 501(c)(3) status as educational organizations. The fact that you practice at a public school will not affect your tax exempt status. Schools are tax exempt educational organizations, too! Please contact me if you’d like help applying for 501c3 tax exempt status.
    Carol Topp, CPA

  7. We’re a small community pool/swim club set up as a 501(c)(7). We’re considering conducting a few fundraisers to help generate extra funds needed for capital improvements to our pool. More fundraising=less impact on members’ annual dues! The programs we’re looking into do not assess sales tax. Would we need to pay taxes on funds generated via our members or friends/family of members with these fundraisers (online chocolates, restaurant spirit nights, plant sales, etc.)? Any other rules/regulations we should be mindful of as we fund-raise?

    Thank you – Kathy

  8. Carol Topp says:

    This website is to assist homeschool organizations with federal tax exempt status. I’m not familiar with the sales tax laws for your state (nor did you even mention your state). My advice is to contact your state’s Department of Revenue and ask about sales tax on fundraisers held by a swim club. Most states do not give sales tax exemption to 501c7s, so it is possible that your swim club does have to collect and submit sales tax on items they sell.
    Also watch out that at least 65% of your total revenues come from member fees. IOW, only 35% can come from fundraisers and other non-member sources of revenues (like interest).
    Carol Topp, CPA

  9. Jeff Skelding says:

    I’m sorry it took so long to respond, we just started for the season. I am very interested in filing for 501c3 status. I guess I need the easiest way to do this as I work, and run our club 5 days a week. Is there a “short form” for this?

  10. Carol Topp says:

    Yes, in July 2014 the IRS introduced the Form 1023-EZ for small, qualified nonprofit organizations to receive 501(c)(3) tax exempt status. Read more here:

    I have helped several groups use the new 1023-EZ. I’m happy to help your organizations as well. Learn more here:

    Carol Topp, CPA

  11. We are a 501c7, because our kids are involved in monthly fundraisers they and have separate accounts set up. we were unable to get the 501c3 (NY). We are all volunteer and I allow all children from ages 3-18 to join our all star cheer gym. But they fundraise to help pay for their fees (uniforms; competitions, travel…). Is there another way that we can do this and keep the individual accounts for each child? without the fundraising most would not be able to participate and we really want to get grants to supply the gym with equipment. HELP

  12. Carol Topp says:

    My understanding is that setting up private fundraising accounts is what the IRS calls “inurement” (individuals benefiting from the revenues of the nonprofit). It is forbidden and could cause a nonprofit to lose its tax exempt status.

    This blog post explains why IFAs are prohibited. Do Not Use Individual Fundraising Accounts

    Parent Booster USA says that “Only in very limited circumstances are IFAs considered legal fundraising activities of booster clubs. Parent Booster USA can provide assistance in obtaining a legal review of an organization’s IFA policy.”

    Perhaps you should consider contacting Parent Booster USA and see of they can help.

    Carol Topp, CPA

  13. Rob Harper says:

    Do you have to incorporate to become a 501c3 or can you do it as an association.

  14. Carol Topp says:

    Your organization can be an association, or more specifically an unincorporated association, and allpy for tax exempt status, but if your organization decides to incorporate in the future, then you must get a new EIN and reapply for tax exempt status, because you have formed a new legal, entity, a nonprofit corporation.

    So that’s something to think about…might your organization desire to become a nonprofit corporation in the future? There are many advantages to nonprofit incorporation. If so, it’s advisable to incorporate now and then apply for tax exemption as a nonprofit corporation.

    I’d estimate that probably 80-90% of 501c3 tax exempt organization are nonprofit corporations, not unincorporated associations.

  15. Diane says:

    We are a social dance club, that is currently a 501 c 7; but because we also teach weekly classes (Int/Adv classes have an entrance fee, beginner classes are free) to the public, we would like to become a 501 c 3. Do the benefits outweigh the costs of making this transition, and would the IRS consider our request valid?

  16. Carol Topp says:

    I specialize in homeschool organizations, not dance clubs. I recommend that you contact a few local dance clubs or national dance club associations and ask what tax exempt status they have, c3 or c7.

    Or search for “dance clubs” and see how they are classified.

    Good luck!

  17. Ed Gorch says:

    What would you think the cost would be to go from a c7 to a c3? Thanks Ed.

  18. Carol Topp says:

    IRS fee: $400 to $850
    Nonprofit incorporation in your state: varies from $25 to $150
    Professional help: varies from $200 to thousands if you need to hire an attorney

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