Q. What does it take to be a “well-governed” club in the eyes of the IRS?
A: Tax-exempt clubs that file Form 990 (Federal Return of Organization Exempt from Income Tax) annually with the Internal Revenue Service (IRS) Part VI, Section B questions 12, 13 and 14 of the revised Form 990 ask about the existence of a conflict of interest policy, whistleblower protection policy and a record retention and destruction policy. While such policies are not required under the Internal Revenue Code, according to the IRS, “a well-governed organization is more likely to be tax compliant. As a result, the questions included in the 990 have a twofold purpose—to provide some insight into an organization’s practices as well as to educate organizations about such practices.”
Clubs strive to be the best that they can be in providing services to their members. In this pursuit of perfection, club leadership is generally interested in not only what other wellrun clubs do, but also in what would be described as “best practices.” Best practices encompass all club activities across the board. Other key indicators that your club is governed well include having a disaster recovery plan, long-range plan, investment policy, accounting and internal control procedures manual, board of governors policy manual, employee policies and procedures manual and a policy on background checks.
Daniel T. Condon is a founding partner in the accounting firm of Condon O’Meara McGinty & Donnelly LLP, which currently serves as auditors, consultants and tax advisors to more than 325 clubs in 14 states. He has practiced in the area of private membership clubs for more than 30 years. Dan can be reached at 212-661-7777. Learn more about COMD at www.comdcpa.com.