Caleb Brister
New Member
- Jurisdiction
- Texas
My business is going to be a commune type place and there will be a one time fee for membership there. Can I say that you can't enter my business if you have more than a certain amount of money?
Can I say that you can't enter my business if you have more than a certain amount of money?
- Thread Starter Caleb Brister
- Start date
adjusterjack
Super Moderator
It's your business. You make the rules as long as you aren't illegally discriminating against a protected class.
Now, once you "say" it how will you enforce it?
Will you be requiring financial statements, income tax records, something else?
Will your criteria be income based or asset based or a combination of both?
Will you be requalifying members at intervals?
What you are proposing is rather common for a lot of things.
For example I get my property tax assessment frozen while my income is below a certain level. If it goes higher I don't get the exemption.
There is low to moderate income housing available in many cities where there is a limit to how much money you make to qualify for the subsidy.
If your "commune" is designed to provide services or opportunities for lower income people you might qualify as a tax exempt non-profit under IRS rules.
Now, once you "say" it how will you enforce it?
Will you be requiring financial statements, income tax records, something else?
Will your criteria be income based or asset based or a combination of both?
Will you be requalifying members at intervals?
What you are proposing is rather common for a lot of things.
For example I get my property tax assessment frozen while my income is below a certain level. If it goes higher I don't get the exemption.
There is low to moderate income housing available in many cities where there is a limit to how much money you make to qualify for the subsidy.
If your "commune" is designed to provide services or opportunities for lower income people you might qualify as a tax exempt non-profit under IRS rules.
Tax Counsel
Well-Known Member
It might, but there are some special rules the organization must meet to qualify. If you are interested in qualifying for that, read IRS Publication 557, and Form 1023 and its instructions. That will familiarize with the basic process. If you want to have the application go through smoothly, I suggest you see an attorney practices in the area of exempt organizations.
The IRS does not use the term "nonprofit" as that is a misnomer. A lot of big charities effectively run at a profit. It used the term "exempt organization" and there are more types of exempt organizations than just charitable and religious organizations. But the key thing to keep in mind is that those profits also are used to further the exempt mission of the organization. They cannot go to the persons who set it and run the organization.
You'd want to check with your state tax agency, too, to see if it requires anything more than the IRS approval to get state tax exemption.
As to your initial question, it is not illegal under federal law or the law of any state to bar high income persons from your establishment. As Jack noted, verifying the wealth of the individual may be a rather time intensive project. But if you want the tax exemption for serving mostly low income persons, that's something you'll need to work out. The lawyer can help you with that, too.
