As soon as a Rotary club is chartered by Rotary International, it automatically becomes an IRS-approved 501(c)(4) tax-exempt nonprofit organization, under RI’s 501(c)(4) group umbrella. A club retains that status as long as its required version of the Form 990 tax return is filed each year with the IRS. If a club loses its 501(C)(4) tax-exempt status for failure to file its tax returns, unless the problem is remedied within a stated brief period of time, the club must go through the costly and time-consuming process to request its own 501(c)(4) determination letter from the IRS. It can never again return to its previous 501(c)(4) group status under the RI umbrella, once that happens.
A 501(c)(4) tax-exempt status means a club does not have to pay taxes on its income. It does not mean that contributions to the club are tax-deductible. Only contributions made to a 501(c)(3) tax-exempt nonprofit organizations are tax-deductible. The problem with a Rotary club qualifying to become a 501(c)(3) is that IRS prohibits any of the income of a 501(c)(3) organization from ever being used in any way for the benefit of its members. This is the reason why some Rotary clubs create a club foundation and apply to have that determined by the IRS to be a qualified 501(c)(3) organization. Is there an alternative?  Yes, our Rotary district is in the process of creating a District Foundation, with which clubs will be able to deposit donor advised funds. Other districts have provided this service to their clubs, alleviating them from having to create, maintain and file tax returns for their own club foundations.
Both 501(c)(3) and 501(c)(4) organizations are required to file annual tax returns. For Rotary and Rotary-related organizations, whose fiscal year ends on June 30, the tax filing deadline each year is November 15.  With that deadline rapidly approaching, the District Finance Committee urges all clubs and their club foundations to protect their tax-exempt status by filing their tax returns on time.
Questions on this subject can be addressed to PDG Art Harrington,