Mill Creek Rifle Club

Profit vs Not for Profit

Profit vs Not for Profit

Greetings all, I wanted to get out a message to you about a topic the Board of Directors have been discussing. During the last Member Zoom meeting I mentioned the Board was studying a for-profit organization for the Club.

As you might imagine the Board discusses many topics that, we hope, benefits the membership and club. I want to share with you the result of this discussion.

This issue was brought up by one of its board members and the board did its due diligence to explore and discuss all aspects of what this would mean for the club and its members.

There are many issues to consider when exploring a for-profit status; member benefit, financial issues and how the organization would be structured. As you may know the club is a 501(c) 7 organization. The IRS classifies MCRC as a social club. We enjoy paying no taxes on related business income and a reduced real estate property tax. Both of which would change if the club became for-profit.

First, we asked our CPA to look into the financial impact to the Club. We used our 2019 actual revenues and expenses for the basis of this study. In order to replicate the 2019 bottom line, it was determined the club would have to have more than $80,000 in additional revenues just to break even if we were to be for- profit. The club has 3 revenue sources; they are 1) member dues, 2) competition fees and 3) law enforcement range fees.

Due to our current 501(c) 7 tax status, we are restricted to the amount we can charge LE as it is considered Unrelated Business Income. Currently, the cap is about $30,000 per year. If we charge more and the IRS audits the club, we could be charged a penalty, pay back taxes and possibly lose our tax-exempt status.

Let’s assume we don’t change member dues and competition fees. It is hard to imagine our LE partners would accept a 144% increase in their fees. If they did pay more this would just get us to break even. If the club were to lose LE income, proponents of converting to for-profit had no viable replacement income strategies. While I agree the LE community is getting a good deal, I would argue the members are getting a good deal too.

We are able to keep member dues at a great rate, the LE income helps us fund future improvements to the club and the LE community brings much credibility to the club as witnessed when going to the De Soto planning commission and City Council when applying for our range expansion project.

Next issue is the organizational complexity of pursuing a for-profit status. Putting the cost of making this change aside, a for-profit organization would have to have owners. Who would be the owners? All the members? Would each member be given a share in the organization? How would profit sharing be handled? We have 1,900 members with the possibility of adding more, when members leave and new members are accepted, how do we handle these shares in the organization? If members became owners, would the even pay dues, just get income. It gets very complicated.

Below is Article II from our by-laws.

Article II – Purpose

The purpose of the organization is to: provide facilities for the safe, lawful and Club-approved use of small arms by members and their guests; provide facilities for law enforcement personnel training and practice; provide small arms competitive shooting events; provide facilities for NRA approved safety and hunter training; and generally promote shooting sports and related fellowship. The Club was founded to promote precision rifle shooting. Therefore, the Club will continue to promote all forms of precision shooting including benchrest competition. All dues, fees, assessments, match proceeds and other revenues derived from the use of Club facilities shall be used for the maintenance and improvement of the Club facilities and promotion and preservation of all small arms sports.

I am concerned the purpose of the club would change if we changed to a for- profit organization. Additionally, it would require a member vote to change the structure of the club.

Finally, I have had extensive conversations with the Hodgdon Family. They do not agree a for-profit organization would benefit the club or its members.

Additionally, our CPA indicated we cannot predict what the Federal Government will do with additional taxes in the future, especially in this current political climate. Who knows, tax laws may change that might make a for-profit organization favorable. This topic can be studied again if and when it makes sense.

This past Monday, the board of directors voted to not pursue a for-profit status for the club. I can assure you this topic was taken seriously and studied carefully by the board, its attorneys and our accounting experts. Attached is the resolution the board passed.

 Thank you, Dick Cooper

Resolution of Board of Directors of Mill Creek Rifle Club

 Whereas, the Mill Creek Rifle Club (herein after “Club”) is a non-profit Kansas corporation, qualified pursuant to the provision of Internal Revenue Code section 501(c)(7): and

WHEREAS, as stated in Article II of the Club’s current by-laws, the purpose of the organization is to provide facilities for the safe, lawful and club-approved use of small arms by members and their guests; provide facilities for law enforcement personnel training and practice; provide small arms competitive shooting events; provide facilities for NRA approved safety and hunter training; and generally, promote shooting sports and related fellowship… All dues fees, assessments, match proceeds and other revenues derived from the use of Club facilities shall be used for the maintenance and improvement of the Club facilities and promotion and preservation of all small arms sports.

WHEREAS, discussions have arisen among the Board of Directors regarding abandoning the Club’s 501 (c)(7) non-profit status and converting to a for-profit organization.

Now therefore, be it resolved as follows:

1. Abandonment of the Club’s 501 (c)(7) status and converting to a for-profit organization is inconsistent with the stated purposes of the Club in the current by-laws.
2. The Club is a private social club organized to support the shooting sports and provide a safe facility for its members to practice, train and compete; it is not, and should not be, a profit-generating
3. Abandonment of the Club’s 501 (c)(7) non-profit status is not in the best interest of the

I, the undersigned, certify that this Resolution was adopted at a regularly scheduled meeting of the Board of Directors on February 15, 2021, at which a quorum of the Board of Directors was present, and at which the requisite percentage of the quorum voted to adopt the Resolution and that the Resolution has not been rescinded, modified or canceled as of the date of my execution of the same and that it remains in full force and effect of this date.

Executed this 15^th day of February, 2021

By:                                                                                                      

Richard B. Cooper, President

Last Updated: Wednesday, 24 February 2021 23:28