Cycle News is a weekly magazine that covers all aspects of motorcycling including Supercross, Motocross and MotoGP as well as new motorcycles
Issue link: https://magazine.cyclenews.com/i/125678
Krin. NEW TAX RULES FOR CYCLE CLUB By Robert O. Fee PART III The Federal Tax Reform Act of 1969 contalned a clause that affects the treasury and operations of every exempt motorcycle club In the nation that sponsors a competition event, road rally, or social function. In general, the Reform Act extends the Unrelated Business Income Tax to almost all exempt organizations In taxable years beginning after 1969.SpeclflcalIy, the tax is extended to the Income· of a social club that is derived from nonmembership sources. Under previous rules, Income to an exempt club from non-members was considered to be exempt If the activities producting the Income was In furtherance of the club's purposes and the proceeds did not benefit the members of the club. Admissions, donations, or contributions coming from any source but a bona-tide club member is now taxable to the club. For the club treasurer. this means that two sets of books are now necessary. Exempt clubs promoting activities producing Income from non-members w1ll now have two tax returns to fUe; Form 990 or 990SF on which they w1ll report their exempt Income and the Form 990T for the taxable, non-member Income. Expenses of the club's activities must also be segregated and allocated to the proper return to offset the Income produced by the taxable and exempt Income. Otherwise deductions agalnst exempt Income are going to get mixed UP with deductions agalnst taxable 1ncome wh1cb would lower the tax due. That is one distortion that "Uncle" def1n1telydoesn't l1ke. On the other hand If the reverse situation occurs and deductions against taxable Income are applied' to the exempt 1ncome, the club w1ll be paying more taxes than necessary. 197015 the year of change (and perhaps chaos). Your club treasurer should start the double book system immediately and get the first six months of the year allocated at leisure before the year's end. By doing It now, many headaches w1ll be avoided at the end of the year. To ignore the club's tax responsibUities set forth by the new law is a crime for wh1cb there are severe penalties. The members of an Incorporated club are generally protected by the limited llabUity provisions of the corporate status. The officers however, are not so protected. They are responsible for the Corporation's actions and are personally llable for the penalties for fa1lure to We. The penalties are not avoided nor transferred to the membership of the club If the club directs the officers to Ignore the legal requirements. The law considers the officers the leaders of the organization with the responslbl1ty for such leadership delegated to the officers by reason of their election. A good analogy would be the bead of the household call1ng his family together and sayIng, "Look Family, the Government says I have to fUI out this s111y set of papers and pay a tax. We really can't afford It because we don't have the money or we would have to cancel our trip to Disneyland. What shouldIdowiththeseforms?" You can lmagine what the chUdren woUld say and It shouldn't be hard to figure out the legal consequences. It's for sure the chUdren won't go to jail. In addition, one of the "Kids" can claim UP to 10% of the tax and penalty due for reporting such cr1mlnal activities as fallure to We a tax return. Just to make reporting more attractive, a recent House Apprqpr1ation BID wouId allow employment of about 1500 additional persons In ·the Compllance Branch (the Investigative and enforcement arm of the mS) for fiscal 1971. Notlng that some 40% of the returns audited last year resulted In no change, the House Appropriation Committee re(JIested' the IRS to redouble Its efforts to develop more effective and productive audit procedures contalnlng a greater probabUity of finding tax def1clencles. This may account for the Information exchange between the ms and the FTB mentioned In the first column of this series. Naive Optimists who feel that sleePing dogs should be left be, are advised that the bounds are awakenlng and theY're hungry - for money of course. Both the State and Federal tax people (prodded by Congress) have become aware that Exempt Organizations are a source of tax revenue heretofore neglected and In many cases the pr1v11eges of tax exemption have been abused by the organizations themselves. Complying with the law and fUlng the returns may bring re(JIests for information about prior year's returns that have been Ignored. U so, they can probably be picked UP for the tax due and late fUlng penalties and interest (25% plus 6%/yr). U the ms or FTB have to unearth your club and demand that the officers comply with the law, It's reasonable to assume that the fallure to file penalties (100% of deficiencies plus other dollar amounts) will be assessed. Then there Is always the charge of fraud that can be raised on the failure to me Issue and that Is a goto- jaul situation, not something to pass off lightly. The preceedlng columns presented and discussed the changes of law as they affect social clubs In general. For more specific application of the law to your Individual club, consult the IRS or FTB office or a lax practitioner who Is famUiar with the unusual and complex field of tax exempt organizations. To ignore the law is to risk your fortune and possibly your freedom. (Continued [rom page 20) a few seconds. Aberg, In pain from a broken bone In his left foot received In Sweden, beld second place all the way. He and Kring fln1sbed the meeting level on polnts-but Kring's total race time was just 0.8 seconds quicker. Friedrichs stopped with an acb1ng wrist and Belg1um's Jef Teuwissen, fourth In the opening race, retired when the gear-change lever of his Husqvarna broke. Their retirements allowed the works Malcos of Ake Jonsson and WeU to move to third and fourth places overall. The Bene1l1 factory, dlsbeartened by the TT when both their four cylinder mach1nes failed to complete the Junior race, have decided to drop Aussle Kel Carruthers from the team It was reported In the British weekly, Motor Cycle News. They wUl concentrate all their efforts on one mach1ne for ltal1an Renzo PasoIln1 for the rest of the season. The decision to drop Carruthers, the man who gave Bene1l1 victory in the 250 TT and the 250 world championship last year, was made by team manager Count Nardi Del as they left the Isle of Man to return to Italy. Said Carruthers last Monday: "I don't feel that I have been sacked and have heard nothing off1c1aUy. I came to a mutual agreement .wlth Bene1l1 that If I did not find the existing mach1nes competitive I need not ride them. Anyway my contract Is to ride the new bikes that are belng prepared and should be ready by the end of the year," said Carruthers. "Nardi Dei admitted that the Bene1l1 was no speed match for the M.V." Roberts and Gary Scott from their near abU1ty, tie the previous week started off as another photo fln1sh race until Scott again became over-anxious In the turn and found his rear wheel comlng around and passlng front. Down went Scott and on went Roberts to another green plate 250cc win. Roberts and his Suzuki and Scott and his Yamaha give Ascot a weekly matcb race never before seen In baH mUe racing circles In the west. Horsepower. McHaI Enterprises surprised the expert, amateur, and novice winners with their new "Apollo" belmets and money. VP Tom Johnson was on hand to present an extra $100 to Rockwood, $50.00 to Dorsch, and $25.00 to Roberts for wlnnlng the flnals. Each received a new "Apollo" In addition to the casb. ThIs' UPPed Rockwood's purse to $700.00 for a total of nine minutes work. (Results on page 22) even. and mechanics appear exacly TRY FE PLUS AND SEE FOR YOURSELF. 1500 YAMAHA DEALERS CAN'T BE WRONG J.N. Roberts sticks F.E. Plus In his Husky. Because It boosts power. Increases eas mlleaee. Adds RPM's on top. J.N. should know. Uslne FE PLUS, he won the Cherry Creek Hare and Hound, the touehest cross country race In the U.S. 400 started•••S finished and J.N. came out on top with FE PLUS. FE PLUS elves the same added p.ower and reliability to any bike. June 21: Mike Patrick road to victory In the 100's ".C. Hare Scrambles (250 Ex'pERT) uslne FE PLUS in his Yamaha. Phil Bowers who was 2nd 250 EXPERT also relies on FE PLUS fOl' consistent top performance. Sure, it's sold only by Yamaha - by some 1500 local Yamaha dealers. But it works just as good in any bike. Husky. Harley. Honda. Hodaka. Bultaco. Triumph. Suzuki. Kawasaki. BSA. BMW. Montesa. You name it. Whether you've got a 2·strpke or a 4·stroke, FE Plus oils do the job. Ask any of the big names like these guys. Coppage, Roberts, Hummer, Gulbransen, Baker, Larsson, Patrick, Bowers, Mashburn. They all use FE Plus. FE PLUS. Sold exclusively by your local Yamaha dealer. A product of Seo( liar EJIlerprl ..s, Inc., Encino, Calif. 91316 FE PLUS works, Ask lIIe Baja 500 winners. They'll tell you it was no accident that the 1st bi ke overall and the first five to cross the finish Iioe in both classes used FE PLUS. Prove it to yourself whetber you race or ride for pleasun. ~ Cl.. CI) ~ !oJ :i: !oJ d ::-. (,) CARRUTHERS DROPPED I oe R Ie WOO II (Cont'd. [rom page 8 ) ' - - - - - - - - - - - HUMMER AND GULBRANSEN'S XLCH powered Harley· Davidson uslne FE PLUS flashes to countless victories. FE PLUS elves their Harley the extra power and reliability that makes this duo hleh point AMA pro· fesslonal Side Car point leader and Num"r 1 AFM plate holder. Add FE PLUS and HARLEY·DAVIDSON to HUMMER AND GULBRANSEN and you've eot a championship team that has never "en defeated at a.C.I.R. ~ YAMAHA • I TS A BEITER MACHINE ...