Veterans’ Organizations Exempt under IRC 501c19
Prior to the enactment of Internal Revenue Code Section 501(c)(19) in 1972, war veterans’ organizations were grouped together with all other veterans’ organizations and recognized as tax-exempt under the social welfare and social club sections of the Code. Under the original version of the statute, an organization formed under Section 501(c)(19) could carry on programs involving Americanism, youth activities, community activities, and educational programs on issues of national security and foreign affairs. In addition, veterans’ organizations could receive exempt income by providing certain insurance benefits for members or their dependents.
As the number of living war veterans declined and the tax-exempt status of many organizations was in danger due to waning membership, Congress amended Section 501(c)(19) and deleted the requirement that 75 percent of the members had to be war veterans. Today, depending on the organization and purpose of a veterans’ organization, it may qualify for tax-exempt status under numerous sections of the Internal Revenue Code besides Section 501(c)(19).
In order to qualify as a tax-exempt veterans’ organization under Section 501(c)(19), a group must have a membership that is comprised of past or present members of the United States Armed Forces (veterans) by at least 75 percent. Substantially all of the remaining members (at least 90 percent) must be cadets or spouses, widows, widowers, ancestors, or lineal descendants of veterans or cadets. Only a small number of members (2.5 percent of total members) may be individuals who are not veterans, cadets, or qualifying relatives. A veterans’ post that admits social members or friends as full members will lose its tax-exempt status if they make up more than 2.5 percent of the total membership.
Auxiliaries units may also qualify for exemption under Section 501(c)(19) so long as they are separately organized and they support a post already organized under the same code section. In order to qualify, an auxiliary unit must have members that are already members of a 501(c)(19) organization or that are spouses or close relatives. In addition, no part of the net earning of the auxiliary unit may inure to the benefit of any private shareholder or individual.
Veterans’ organizations formed under Section 501(c)(19) are entitled to engage in a fairly broad range of activities. Under the statute, they must be operated exclusively for one or more of the following purposes:
- To promote the social welfare of the community, such as sponsoring youth activities or allowing other community organizations to use their facilities without charge;
- To assist disabled and needy veterans, their spouses, and dependents;
- To provide entertainment, care, and assistance to hospitalized veterans;
- To conduct programs for religious, charitable, scientific, literary, or other educational purposes;
- To carry on programs for the perpetuation of the memory of veterans and to offer comfort to their families;
- To sponsor or participate in patriotic activities;
- To provide insurance benefits to their members or families;
- To provide social and recreational activities for their members.
Veterans’ organizations are also allowed to represent their members before legislative bodies at both the federal and state level concerning legislation that affects veterans as a class.