Differentiating 501(c)(3) Public Benefiting Art Museums from 501(c)(7) Social Clubs

July 28, 2023


Yuha Jung

This article compares the differences between 501(c)(3), community benefiting nonprofits, and 501(c)(7), social clubs, and applies them to discussing legal obligations in the field of art museums that are mostly 501(c)(3) tax-exempt organizations. In doing so, it critically discusses how museums must differentiate themselves from social clubs in order to afford the wider tax benefits that are given only to 501(c)(3) nonprofits. These wider tax benefits include exemption from federal income taxes[1] and often state taxes (e.g., income tax, property tax, excise tax) as well as tax deductions enjoyed by their donors under § 170(c)(2).[2] While this article consults the tax codes and regulations and uses empirical evidence for arguments, it includes critical and theoretical arguments of how art museums should serve diverse public to differentiate themselves from social clubs and remain worthy of tax benefits they currently enjoy. Below, the article (1) shares brief background information on the practice of art museums, (2) presents major differences between 501(c)(3) and 501(c)(7) based on the tax codes and regulations, (3) applies them to the current practice of art museums, especially regarding the “no private benefits” provision, and (4) proposes an affirmative community benefit standard to rectify any possible deviations of museum practice from being qualified as public benefiting nonprofits.

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I am an associate professor and the director of graduate studies of Arts Administration at the University of Kentucky. I am a devoted educator and researcher who is passionate about studying museums and social and cultural justice issues around the arts and cultural organizations and teaching students about them. I primarily teach financial management 

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