Tax Exempt Status

1. The Internal Revenue Service has classified the Navy League (National) as tax-exempt under the provisions of Section 501(c)(3) of the Internal Revenue Code. Contributions to the Navy League are tax-deductible. That ruling applies only to the Navy League (National). However, National Headquarters has obtained a group ruling whereby those councils that have applied to National Headquarters for inclusion, and have been accepted under the group ruling, will be afforded the same exemption and tax deductibility. Both National Headquarters and the IRS encourage councils that are eligible to apply for inclusion in the group ruling, for which there is no charge.

2. Each council electing to be included in the group ruling will be required normally only once to submit, to the Senior Director of Finance at National Headquarters, the following documentation:

a. A letter, signed by a principal officer of the council, indicating that the council accounting period ends on December 31, and that the council desires and agrees to recognition of exemption from federal income taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 under the Navy League’s group exemption.

b. A copy of the Council Bylaws or a statement that the Council Articles function as its Bylaws as well. The Sample Council Articles and Bylaws will satisfy the Internal Revenue Service requirements for tax exemption under Section 501(c)(3) of the Code; however, individual states may impose additional requirements in order to incorporate in their jurisdiction. Incorporation rather than mere association is of course the favored procedure. (Sample of Articles and Bylaws are found in Attachment 1 beginning on page 110.)

c. Notification of the council’s post office box number unless the council has a permanent staff and office. The information may be included in the same letter with Item a. above.

d. A brief narrative of the council’s activities and receipts and expenditures in order for Headquarters to determine that the council’s activities are consistent with those of the Navy League Charter and Bylaws. This also may be combined with Item a. above.

e. If not already shown in the council’s articles that the council’s name complies with the requirements set forth, Navy League of the United States __________ Council, the council will need to submit an amendment to its articles. If the council is incorporated, that amendment must show the date-filed stamp of the state officer authorized to file corporation amendments in the official state records. Note: “ ____________ Council of the Navy League of the United States” is not acceptable. If necessary, the Council name must be amended to start with the words “Navy League.” This is an IRS requirement.

f. The employer identification number of the council. Each Council must have such a number, if the council is to be included in the group exemption. If the council does not have such a number, they should contact the IRS and complete Form “SS-4”. A council may not use another council‘s employer identification number or that of the National Headquarters.

g. If the council has been recognized as exempt from federal income taxation under Section 501(c)(3) of the Code, a principal officer of the council will need to send to National Headquarters a copy of the council resolution indicating that the council relinquishes that exemption as of the date that it is included in that group exemption. This may be combined with item a. above. Sending a copy of the original exemption letter is recommended but not required.

3. Each participating council should submit all of the information relevant to it from the above list as soon as possible. Those councils that are not exempt from federal income taxation under Sections 501(c)(3) of the Internal Revenue Code are not eligible for deductibility of contributions and reduced-rate mailing privileges, and all council income will be taxable unless a separate exemption has already been established.

4. Councils choosing to participate in the group-ruling program will still have full responsibility in the event of an Internal Revenue Service audit of the council. Furthermore, inclusion in the group ruling will not relieve the council of its obligation to file Form 990, Return of Organization Exempt from federal income tax, if the council has gross receipts in excess of twenty-five thousand dollars ($25,000) in any calendar year.

5. National urges all councils, but especially those not now recognized as exempt under Section 501(c)(3) of the Code, to take the time and effort to participate in this valuable program. This service will keep the council better informed and in compliance with exemption tax laws while reducing the burden of independently keeping track of future changes in law.

6. Only councils located on U.S. territory may participate in the Group Exemption, but councils located on foreign soil may apply separately for individual tax exemption. (Contributions to foreign councils are not tax-deductible on U.S. Income Tax returns.) Participation in the Group Exemption is free. To obtain an individual exemption, the council must pay a user fee directly to the IRS and file an application (Form 1023). The council should contact the Senior Director of Finance at National Headquarters for further information.