Facebook too public for private clubs?…But Clubster is just right…

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Hey everyone…an important story on social media and private club has appeared in the July issue of the Private Club Adivsor newsletter.

The Private Club Advisor is the private club industry’s leading monthly business letter written for private club directors, officers, owners, and managers, and focuses on club policy issues, member relations, and legal and legislative developments affecting the club industry.

PCA did an indepth interview with Jim Reilly, one of the leading experts in private club tax issues. Many clubs are not comfortalbe with having a presence on Facebook and Twitter, because they are too public, and wish to keep their private club communications private.

Now in addition to this, tax-exempt clubs should be aware of the potential tax ramifications of maintaining a presence on public social networks.

This is one of the many reasons Clubster was created. Clubster is completely private…precisely because of these types of things..

Here is the story:

ONLINE OR OVER THE LINE? SOCIAL MEDIA IN PRIVATE CLUBS… Like it or not, social media plays a major role in how people stay connected these days, but is it a good fit for private clubs? Jim Reilly, CPA, JD, a partner with the accounting firm Condon O’Meara McGinty & Donnelly LLP, has studied that question extensively. Based on his analysis, he said that 501(c)(7) clubs should be cautious and avoid adopting platforms designed for use by the general public that may jeopardize their privacy status.

Reilly explained that many of the more popular sites (Facebook, Twitter, and LinkedIn for example) appear to have the potential to allow non-member access to information shared by the club which may create the impression that the club is not truly private and/or may be soliciting non-member club usage. For example, in the case of a 501(c) (7) tax exempt club, Reilly said that Treasury Regulation §1.501(c) (7)-1(b) provides that solicitation by advertisement or otherwise for public patronage of club facilities is prima facie evidence that a club is engaging in business and may not be operated for tax-exempt purposes and he added that in utilizing social media, a tax-exempt club should be mindful of such regulation. Reilly has reason to believe the IRS would closely scrutinize and potentially take exception to a private club’s social media presence if it were visible to non-members.

To get an idea of what a non-member (or an IRS agent) might find online, we did a quick search for “Golf and Country Club” on Facebook and turned up a surprising number of pages established by clubs that identify themselves as private. On most we were able to view pictures from private weddings and member events, peruse upcoming meetings and dining room specials and read comments posted by both members and management. In many cases, it would even have been possible to post a message visible to the club’s members. Some might argue that such visibility serves as a marketing tool for the club, but Reilly believes it is an unnecessary risk for private clubs, particularly since there are alternatives available.

“Clubs are conservative by nature because their boards have to answer to membership so the adoption of social media should be carefully considered,” Reilly said. While there are currently a few social media platforms that seem to be designed to be more private than the more popular sites utilized by the public, Reilly said that he is impressed with Clubster. “In a sense, Clubster functions consistent with the operations of private clubs. No one can get in unless they are a member, and what goes on in the club stays in the club because Clubster is not a public platform. It assists with the social mission of a private club by promoting the social interaction of members including, among other things, the creation of golf, tennis or social groups, and it provides a way for management to promote member usage and engagement.” Reilly added that, because clubs do not receive revenues from Clubster, there do not seem to be potentially problematic unrelated business income, or non-traditional business issues for the clubs that utilize Clubster.

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