Background

Before the enactment of IRC 501(c)(19) on August 29, 1972 (Public Law 92-418, 86 Stat. 656, reproduced in 1972-2 C.B. 675), war veterans’ organizations were grouped together with all other veterans’ organizations and recognized as exempt under IRC 501(c)(4) as social welfare organizations. Their subsidiaries, which were formed to maintain and operate their social facilities, were often recognized as exempt social clubs under IRC 501(c)(7). In addition to their other activities, some veterans’ organizations provided one or more types of insurance for their members and their members’ dependents.

The insurance activity of veterans’ organizations was not taxed before passage of the Tax Reform Act of 1969. The unrelated business income tax ( UBIT ) did not apply to social welfare organizations and social clubs. The 1969 Act extended UBIT to all exempt organizations. To prevent taxation of the insurance activities, IRC 501(c)(19) and 512(a)(4) were enacted in 1972. A 501(c)(19) organization’s purposes could include programs involving Americanism, youth activities, community activities and information, and educational programs relating to national security and foreign affairs. The Act also exempted income received by war veterans’ organizations from providing certain insurance benefits for their members or the dependents of their members.

Because the ranks of war veterans were thinning, and many organizations were at risk of losing their tax-exempt status due to waning membership, Congress amended IRC 501(c)(19) on September 3, 1982 (Public Law 97-248, 96 Stat. 640), by deleting the requirement that 75 percent of the members be war veterans. War veterans’ organizations are described in IRC 170(c)(3) and are discussed in the chapter on contributions in this publication.

Congress relaxed membership requirements again in 2003 with passage of Section 105 of the Military Family Tax Relief Act by permitting veterans’ organizations to count ancestors and lineal descendants as part of their veteran base. The Act also broadened the purposes of veterans’ organizations.

Today, depending on their organization and purposes, veterans’ organizations may be recognized as tax exempt under IRC Sections:

• 501(c)(19)

• 501(c)(10)

• 501(c)(4)

• 501(c)(23)

• 501(c)(7)

• 501(c)(2) (holding title to facilities)

• 501(c)(8)

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