The Connecticut General Assembly
OFFICE OF LEGISLATIVE RESEARCH
January 13, 1994 94-R-0055
FROM: Daniel Duffy, Principal Analyst
RE: Liquor Club Guest Book Requirements
You asked (1) for a description of the law establishing club and nonprofit club permits and what kind of organizations qualify for them, (2) for a summary of the law that limits clubs to 13 waivers per year of the requirement that they register all guests in a book, and (3) what kind of organizations are eligible to file for federal tax-exempt status.
Holders of club and nonprofit club permits are permitted to sell liquor to members and their guests. The permit cost is significantly less than the cost of comparable permits for profit-making organizations.
To differentiate between clubs and liquor establishments open to the public, the law requires members to enter the names and addresses of their guests into a book and to sign the entry. There are exemptions to the guest book requirement. All clubs can get waivers for special occasions. In practice, the Department of Liquor Control limits clubs to 13 special occasion waivers per year. And nonprofit clubs can sell to people who are neither members nor guests as long as the total receipts from nonmembers does not exceed 15% of their annual gross.
A club can file for federal tax-exempt status by filing for an exemption under § 501(c)(3) or § 501(c)(4) of the Internal Revenue Code.
CLUB AND NONPROFIT CLUB PERMITS
Club and nonprofit club permits are available to groups which want to serve liquor to members and their guests. Comparable permits for profit-making enterprises would be restaurant or cafe permits. Club permit fees are much lower than the fees for those permits. The annual fees are: club, $240; nonprofit club, $650; restaurant, $1,200, and cafe, $1,750. Every organization with a club or nonprofit club permit must comply with its requirements or obtain one of the more expensive comparable permits.
A club permit allows liquor to be sold and consumed on the premises of a club by members and their guests. Organizations meeting the definition of "club" may obtain the permit. It is an association, which may or may not be incorporated, that has been in existence for at least three years, or is an affiliate of a national organization that has had a branch in the state for one year, before applying for an initial permit. (The three-year requirement does not apply to clubs which, in addition to a clubhouse, offer their members facilities for activities like golf, tennis, bathing, hunting, or riding.) It must exist to promote a common object other than being organized for commercial profit. It must own, lease or have substantial control over a building or other space to provide its members and their guests with suitable and reasonable accommodations.
Clubs are required, on request, to file a list of their members with the Department of Liquor Control by February 1 each year. They must also inform the department whenever new members join. Their aggregate membership fees or dues must be sufficient to pay the cost of maintaining their facility. The club must be run by a board of directors, executive committee, or other group chosen by the members. Members, officers, and employees must not be paid any amount for selling liquor other than a fixed salary set at its annual club meeting (CGS § 30-23(b)).
Nonprofit Club Permit
A nonprofit club permit is like a club permit, except that it may also sell to people who are not members or guests, as long as the total receipts from this group, including receipts from selling liquor, cannot be more than 15% of the club's gross (CGS § 30-23c)).
Clubs can qualify for a nonprofit club permit if they are exempt from federal taxation under § 501(c).
GUEST BOOK REQUIREMENTS
State law requires guests to enter their names and addresses in a guest book over a member's signature and the date. Neither the permittee nor anyone serving liquor may enter the guest's name in the book. The department is authorized to waive the guest book requirement on "special occasions" (CGS § 30-23a).
State guest book regulations require waiver requests to include (1) if a private party, whether it is club-sponsored and the type of affair; (2) if a wedding reception, the blood relationship between the sponsor and the wedding couple; and (3) the number of members and guests expected to attend.
In practice, Department of Liquor Control limits clubs to 13 waivers per year. This allows a club to hold one event each month and one extra.
Members of nonprofit clubs are allowed to rent the premises for events which are not sponsored by the club without maintaining the guest book or obtaining a waiver if the gross receipts to the club from all sources and the rental fee does not exceed 15% of the club's annual gross (Conn. Agencies Reg. § 30-6-B39).
FEDERAL TAX-EXEMPT STATUS
Organizations may apply for federal tax-exempt status to the Internal Revenue Service. Depending on the type of organization, they may qualify either as a type "501(c)(3)" or a "501(c)(4)".
Section 501 (c)(3)
This section exempts corporations, community chests, funds, and foundations from federal taxation if they are operated exclusively for at least one of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, or the prevention of cruelty to animals.
Section 501 (c)(4)
This section exempts civic leagues and employee associations from taxation. Exempt civic leagues must be organized on a not-for-profit basis and operate exclusively for the promotion of social welfare. "Civic leagues" include such groups as advocacy organizations, organizations providing a necessary public service, and homeowners' associations. Local employee associations are exempt if membership is limited to employees and the association's net earnings are exclusively devoted to charitable, educational, or recreational purposes.