Archon Tax Exemption Problems

St Louis Science Fiction Limited, the club which sponsors Archon, a non-profit, applied in 1984 for 501(c)3 status and was turned down. In spite of obviously not meeting the criteria for 501(c)3, it appealed and lost and, for a time, appeared to have jeopardized other clubs' status.

Basically, for a club to get 501(c)3 status it must be run for educational, cultural, or literary purposes except for insubstantial bits, and it must not be run for the profit of any private individual.

The problem was that the St. Louis club presented information including convention flyers which said, more or less, "Party! Party! Party! (oh, yes, there's some program too.)" which the IRS took pretty much at face value to indicate that the con was basically a social event. The IRS also concluded that the Huckster Room and Art Show were major parts of the con (right) and existed primarily for hucksters and artists' to make money selling things. (For example, they pointed out that both were first-come, first served and not juried.)

Given what Archon told them in its application, the IRS was right to deny the exemption. (Of course, what Archon said didn't actually reflect how most cons are run.)

This threw pretty much everyone who ran conventions into a tizzy verging onto a full-scale panic, since it called into question everyone's 501(c)3 status, especially since Archon so unwisely appealed and got the negative determination reviewed and blessed by a tax court and into the IRS's precedents.

Several fannish lawyers with non-profit experience worked with the next couple of clubs which sought 501(c)3 status to make sure that their submissions told the whole story and made it clear that the conventions had significant, clear, and proper non-profit purposes, and explained how the Huckster Room and Art Show were not there to benefit private individuals, but that the selling involved was a necessary part of getting people to bring the art and goods to display, and that hucksters are artists were juried so that they were within the convention's theme.

Reports and Articles:

  • Mike Glyer wrote up the mess at length in File 770 #53 p1 et seq.
  • File 770 #57 p6 (SCIFI passes IRS audit)