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Title 26, Internal Revenue CodeRelease 119-110

§277 Deductions Incurred by Certain Membership Organizations in Transactions with Members

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter B — Computation of Taxable Income › PART IX — ITEMS NOT DEDUCTIBLE › § 277

Last updated Sep 22, 2026|Official source

Summary

Limits deductions for social clubs or membership groups that are not tax-exempt and that mainly give goods or services to their members. These groups can only deduct costs for services, insurance, goods, or other things up to the money they get from members or member transactions that year (this includes income from member education events). If deductions are bigger than that income, the extra is carried forward to the next taxable year. Deductions under sections 243 and 245 are not allowed. This does not apply to organizations that (1) are taxed under subchapter H or L, (2) made an election before October 9, 1969 under section 456(c) or are affiliated with such an organization, (3) are a national securities exchange or a contract market regulated under the Securities Exchange Act of 1934 or the Commodity Exchange Act, or (4) mainly gather and distribute news to members for publication.

Full Legal Text

Title 26, §277

Internal Revenue Code, Source: USLM XML via OLRC

(a)General rule
In the case of a social club or other membership organization which is operated primarily to furnish services or goods to members and which is not exempt from taxation, deductions for the taxable year attributable to furnishing services, insurance, goods, or other items of value to members shall be allowed only to the extent of income derived during such year from members or transactions with members (including income derived during such year from institutes and trade shows which are primarily for the education of members). If for any taxable year such deductions exceed such income, the excess shall be treated as a deduction attributable to furnishing services, insurance, goods, or other items of value to members paid or incurred in the succeeding taxable year. The deductions provided by section 243 and 245 (relating to dividends received by corporations) shall not be allowed to any organization to which this section applies for the taxable year.
(b)Exceptions
Subsection (a) shall not apply to any organization—
(1)which for the taxable year is subject to taxation under subchapter H or L,
(2)which has made an election before October 9, 1969, under section 456(c) or which is affiliated with such an organization,
(3)which for each day of any taxable year is a national securities exchange subject to regulation under the Securities Exchange Act of 1934 or a contract market subject to regulation under the Commodity Exchange Act, or
(4)which is engaged primarily in the gathering and distribution of news to its members for publication.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Securities Exchange Act of 1934, referred to in subsec. (b)(3), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables. The Commodity Exchange Act, referred to in subsec. (b)(3), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables.

Amendments

2014—Subsec. (a). Pub. L. 113–295 struck out “, 244,” after “section 243”. 1986—Subsec. (b)(4). Pub. L. 99–514 added par. (4). 1976—Subsec. (a). Pub. L. 94–568 provided that the deductions provided by section 243, 244, and 245 (relating to dividends received by corporations) shall not be allowed to any organization to which this section applies for the taxable year.

Statutory Notes and Related Subsidiaries

Effective Date

of 2014 AmendmentAmendment by Pub. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Pub. L. 113–295), see section 221(a)(41)(K) of Pub. L. 113–295, set out as a note under section 172 of this title. Except as otherwise provided in section 221(a) of Pub. L. 113–295, amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a

Savings Provision

, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date

of 1986 Amendment Pub. L. 99–514, title XVI, § 1604(b), Oct. 22, 1986, 100 Stat. 2769, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Oct. 22, 1986].”

Effective Date

of 1976 AmendmentAmendment by Pub. L. 94–568 applicable to taxable years beginning after Oct. 20, 1976, see section 1(d) of Pub. L. 94–568, set out as a note under section 501 of this title.

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1970, see section 121(g) of Pub. L. 91–172, set out as an

Effective Date

of 1969 Amendment note under section 511 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 277

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110