"The American Inns of Court is a tax exempt organization as defined in section 501(c)(3) of the Internal Revenue Code. Further, the American Inns of Court has been granted a group exemption ruling that may include any of its “subordinate organizations."
The American Inns of Court was granted 501(c)(3) status because it is a non-profit corporation of a charitable nature that does not engage in political activities or lobbying. This provides two things. First, the American Inns of Court Foundation is not required to pay federal or state tax on its income, except on income that is derived through activities that are unrelated to its central mission. (This is called "unrelated business income tax", or "UBIT".) And second, dues paid to and contributions made to the American Inns of Court are considered tax-deductible.
Local Inns are strongly encouraged to become part of the national group exemption. Becoming part of the group is a two-step process.
Step One: the Inn must obtain an Employer Identification Number (EIN, also know as a "tax ID number") from the IRS. The national office can provide you with the necessary form SS-4, or you can obtain an EIN by telephoning your local IRS service center. You must make sure to include our group exemption number (GEN 3249) when completing your EIN application. Many Inns have already obtained an EIN. If so, it is not necessary to obtain another one. If you are not sure whether your Inn has obtained an EIN or do not know what the number is, you may contact the national office, and we will try to assist you.
Step Two: the Inn must complete a simple option form provided by the national office that indicates whether the Inn wishes to be included in the group exemption. The option form requires you to provide an EIN. We cannot include any Inn that has not first obtained an EIN. The Inn’s fiscal year must also coincide with the Foundation’s fiscal year, which is July 1 to June 30. Once the Inn has properly requested inclusion in our group exemption, it is thereafter considered a 501(c)(3) tax-exempt organization.
Filing a Tax Return
Most Inns are not required to file a tax return with the IRS. Non-profit organizations that have less than $25,000 gross annual revenue do not need to file. If your Inn exceeds $25,000 in gross annual revenue (averaged over three years), then you are required to file a 990-EZ. If this is the case, please contact the national office so that we can advise you on how to file.
State/Local Sales and Use Tax Exemption
Designation as a 501(c)(3) tax-exempt organization does not automatically exempt the Inn from state or local sales and use taxes. Most localities require an organization to apply for such exemption. Since the procedures for each locality vary, please contact the state or local taxing authority to determine how, if possible, to apply for exemption from sales and use taxes. The application process may require some documentation from the national office. Typically this includes a copy of our 501(c)(3) determination letter from the IRS and our group exemption letter. These can be downloaded from our website, or you can call the national office for assistance.
Deductibility of Dues or Other Payments to the Inn
If the Inn opts to be included in our group exemption and is therefore considered a 501(c)(3) tax-exempt organization, then dues and contributions paid to the Inn are considered tax deductible. This can be a benefit for your members. Please keep in mind, however, that only the non-meals portion of the dues is deductible, so the Inn should be prepared to provide a breakdown of how much of a member’s dues payment went to meals versus other expenses.