501(c)(7) Social Club Nonmember Income: The 15% and 35% Guidelines, Rev. Proc. 71-17 Records and Form 990-T

Golf and country clubs, member dining clubs and other social associations can be exempt from federal income tax as social clubs under Internal Revenue Code section 501(c)(7). The rule that most often puts that exemption at risk is how much of the club’s income comes from outside its membership.

This guide covers the IRS 15% and 35% guidelines, how Rev. Proc. 71-17 treats members’ guests, and the tax and returns that apply to nonmember income. It is written for club managers and bookkeepers and reflects IRS information as of October 2026.

The short answer: the 15% and 35% guidelines

Guideline	What it means
35%	Up to 35% of gross receipts, including investment income, may come from sources outside the membership
15%	Within that 35%, no more than 15% of gross receipts should come from the general public’s use of club facilities or services (or other activities that don’t further members’ social or recreational purposes)
Going over	Not an automatic loss of exemption; all the facts and circumstances are considered

The 15% guideline comes from the 1976 congressional reports (H. Rep. No. 94-1353 and S. Rep. No. 94-1318). A social club is expected to be supported by its members’ dues and charges and to be a place where members meet, so the more income it earns from outsiders, the further it drifts from that model.

A worked example

Example: a club has $1,000,000 of gross receipts for the year, made up as follows (hypothetical figures for illustration).

Source	Amount	Category
Dues	$600,000	Members
Member dining (including members’ guests)	$250,000	Members
Public events and private rentals	$100,000	General public (15% test)
Interest and dividends	$50,000	Outside the membership (35% test)

Income from outside the membership is $100,000 + $50,000 = $150,000, or 15% of gross receipts (within the 35% guideline). Public-use income is $100,000, or 10% (within the 15% guideline). One large public event can move these numbers, so check them monthly rather than at year end.

Members’ guests and Rev. Proc. 71-17

Rev. Proc. 71-17 sets out when income from a member’s party can be treated as member income.

• A group of eight or fewer that includes at least one member, where the member or the member’s employer pays directly, is assumed to be a host-guest group
• A group of any size in which 75% or more are members, paid directly by members or their employers, gets the same treatment
• Even when relying on either assumption, keep records showing the group’s makeup and who paid
• For other nonmember use, record each occasion: the date, party size, nonmember names and charges, along with members’ signed statements about reimbursement or employer payment

If those records aren’t kept or can’t be shown to the IRS, the assumptions no longer apply, and all income that cannot be traced to members is treated as nonmember income.

How nonmember income is taxed

Exempt status doesn’t make every dollar tax-free. For a social club, unrelated business taxable income (UBTI) is gross income minus exempt function income, less the deductions directly connected with earning it.

• Exempt function income: dues, fees and charges members pay for goods, facilities or services for themselves, their dependents or their guests (plus income set aside for religious, charitable, educational and similar purposes)
• Taxable income: income from nonmembers who are not bona fide guests of members, and investment income such as interest and dividends
• Form 990-T: required with $1,000 or more of gross unrelated business income; for a club organized as a corporation it is due by the 15th day of the 5th month after year end (May 15 for a calendar year)

Annual returns

Return	Who files
Form 990-N (e-Postcard)	Gross receipts normally $50,000 or less
Form 990-EZ (or 990)	Gross receipts under $200,000 and total assets under $500,000
Form 990	Gross receipts of $200,000 or more, or total assets of $500,000 or more
Form 990-T (in addition)	Gross unrelated business income of $1,000 or more

A club’s governing instrument also may not provide for discrimination against anyone on the basis of race, color or religion.

How the club office can stay on top of it

1. Total by fiscal year: the percentages are measured against the fiscal year’s gross receipts, so keep a running monthly total and know how much room is left under 15% and 35%
2. Sort every sale into three buckets: members (including members’ guests), general public, and investment income, and decide in advance which accounting accounts belong where
3. Keep a Rev. Proc. 71-17 ledger: party size, number of members, nonmember names, amount and payer for each check or event registration
4. Review with your accountant at year end: the ledger and totals feed directly into Forms 990 and 990-T

Frequently asked questions

Does a social club lose its exemption as soon as nonmember income passes 15%?

Not automatically. The IRS says that if a club exceeds the guidelines, all the facts and circumstances are considered in deciding whether it still qualifies. Going over year after year is harder to justify, so track the percentages during the year.

Does investment income count toward the 35%?

Yes. The 35% guideline is measured against gross receipts, including investment income, from sources outside the membership. A social club’s investment income is also generally taxable as unrelated business taxable income (UBTI).

Is a member’s guest’s dinner nonmember income?

Rev. Proc. 71-17 assumes a host-guest relationship when a group of eight or fewer includes at least one member, or when 75% or more of a group are members, and the member or the member’s employer pays directly. Other nonmember use needs records of the date, party size, nonmember names and charges.

What happens if the club doesn’t keep records?

The club loses the use of the Rev. Proc. 71-17 assumptions, and all income that cannot be traced to members is treated as coming from nonmember sources. That hurts both the 15% test and the tax calculation.

Is nonmember income taxed?

Generally, yes. Income from nonmembers who are not bona fide guests of members, and investment income, are taxed as unrelated business income. A club with $1,000 or more of gross unrelated business income files Form 990-T.

Which annual return does a social club file?

Form 990-N if gross receipts are normally $50,000 or less; Form 990-EZ (or 990) if gross receipts are under $200,000 and total assets are under $500,000; otherwise Form 990. Form 990-T is filed in addition in years with $1,000 or more of gross unrelated business income.

Sources

• IRS, “Social clubs — Requirements for exemption — Support by membership dues”
• IRS, “Social clubs”
• IRS, “The enduring relevance of Rev. Proc. 71-17 on IRC Section 501(c)(7) organizations”
• IRS, IRM 7.27.7, “Computation of Unrelated Business Taxable Income for Social Clubs”
• IRS, EO CPE text, “Nonmember Income of Social, Fraternal, Veterans … Organizations”
• IRS, “Form 990 series: Which forms do exempt organizations file”
• IRS, “Instructions for Form 990-T (2025)”

This article is general information based on IRS publications as of October 2026, not individual tax advice. Talk to a professional about your club’s exemption and filings.