LEGAL OPINION PERTAINING TO THE FOUR RULES OF LEGION PROGRAM FOLLOWS:
November 6, 2025
LEGAL OPINION
Subject: The American Legion, the Sons of The American Legion and the four rules of an American Legion Program
For 50 years, the Sons of The American Legion (SAL) has co-existed at all levels of The American Legion. However, this has also created a perception that SAL members have the same rights and privileges as those in The American Legion, and this misinterpretation of the rules, which has gone largely unchecked or uncorrected in some areas, is starting to cause some very real problems for the organization. Recently, this has grown into a larger concern as we hear reports of Posts being audited and, when asked for their membership rolls, submitting the names of SAL members in addition to those of regular members.
This opinion seeks to clarify for everyone that the Sons of The American Legion is a program, not simply a cheaper alternative that comes with the same rights and privileges as a traditional member. Further, leadership at all levels – Post, District, Department and National – must be knowledgeable on what the rules governing veterans and non-profit organizations are and safeguard the integrity of our organization by ensuring that no person or group jeopardizes our future by operating in a manner not consistent with the laws and regulations set by Congress and the IRS.
BACKGROUND
Shortly after the end of hostilities in World War I in Paris, France, LTC Theodore Roosevelt – the oldest son of the former president – had a conversation with George White, a fellow servicemember and editor of The Oregonian, a Portland newspaper; from this discussion, The American Legion would be born. Roosevelt would suggest the immediate establishment of a new servicemen's organization that would include all AEF members, as well as those soldiers who remained stateside as members of the military during the war. Roosevelt and White advocated this proposal ceaselessly until they found sufficient support at headquarters to move forward with the plan. In September 1919, Congress formally recognized the creation of The American Legion when both Houses of Congress passed our congressional charter and signed it into law.
Congress has deemed it in the national interest to afford congressionally chartered organizations some latitude to raise money and lobby Congress that is not available to many other non-profits. As one non-profit trade publication noted:
Above all, 501(c)(19) organizations offer financial, medical, psychological, and social support to veterans, their families, and the community. Through rehabilitation programs, support networks, and advocacy, these groups enhance veterans’ mental health, employment opportunities, and overall well-being. These programs strive to secure a better future for those who have served. However, their impact extends far beyond supporting veterans, as they provide vital assistance to entire communities by mobilizing trained veteran volunteers in fields such as logistics, emergency response, and more during disasters.
At the 1932 National Convention in Portland, OR, The American Legion, while in general session, voted to approve Resolution 28, which established a youth program called “the Sons of the Legion.” The Committee on Junior Activities called for “The National Organization of The American Legion to approve, encourage, and foster organizations of sons of members of The American Legion.” Resolution 456 adopted at the 14th National Convention, states in the two whereas clauses “In the propagation of an organization for such boys' future around a fine idea, and assist in the bringing out the best type of citizenship,” and “[a]n organization of this sort will bring the father closer to his son and make a better Legionnaire of him.“ The first resolve clause states, “One, that The American Legion officially propagate, recognize, and sponsor an organization to be known as the Sons of The American Legion.” Upon the adoption of Resolution 456, it was believed, “Because The American Legion is such a unique organization, with eligibility so highly restricted, it can have no successor. But it can have an heir to whom it can bequeath all its treasured heritage.”
THE PROBLEM
We are hearing more and more anecdotal evidence (and indeed some is even being sent to us) that various Departments and Posts are incorrectly interpreting the IRS code regarding the SAL, and, crucially, may be taking actions that could jeopardize The American Legion’s non-profit status.
Congress sets the membership eligibility criteria for The American Legion, and the laws that govern it are found in Title 36 of the United States Code, Chapter 217, which deals exclusively with our organization. Eligibility is addressed explicitly in 36 USC 21703, a provision most recently amended with the passage of the Legion Act in 2019, and the Internal Revenue Service has promulgated rules based on what the Congressional intent was in the enactment of those laws. For us, the problem arises because Congress and the IRS have created differing rules for veterans of various conflicts, rules that largely do not apply to the SAL.
The IRS, in its Audit Technique Guide for Veterans Organizations, defines a member of a 501(c)19 with the following characteristics:
- An individual eligible for membership under the constitution and bylaws of the veterans’ organization.
- May attend and vote at membership meetings.
- Hold office in the organization.
- Participate in State or National Conventions.
- Posts remit membership dues for the individual to the central organization.
FOUR RULES OF A SUBSIDIARY PROGRAM
SAL squadrons, detachments, and the national organization are not stand-alone Veteran Service Organizations; rather, they must co-exist through the adoption and sponsorship from a post and cannot have their own EIN or tax-exempt status. This means that the SAL is under the full autonomy of its sponsoring post. If the post chooses to allow the squadron to use the post’s EIN and tax-exempt status, that would be predicated on whether the squadron (program) is in full compliance with the Four Rules of a Program. Moreover, the rights and privileges of a program are not the same as those of a Legionnaire, or member of the American Legion Auxiliary. For example, the post bar, restaurant, canteen, or other social activity is intended for Legion members (veterans) of the post, their bona fide guests, and members of the Auxiliary unit, with the revenue remaining in the tax-exempt category. The IRS defines a bona fide guest as an individual a member invites to participate in an activity and pays for his expenses. If the guest pays for his own recreation or food, he isn’t a bona fide guest. Social non-members are not eligible for membership in The American Legion. The members of the SAL squadron would be considered social non-members, and therefore, any sales or revenue generated from social non-members may also be subject to Unrelated Business Income (UBI) Tax by the IRS.
The IRS provides an example in the “Tax Guide for Veteran Organizations” (rev. 4-2018.):
Post A has 1,500 individuals who participate in the club’s bar and gaming activities. 1,200 are veteran members who are eligible for membership as described in the post’s constitution and bylaws. 300 are social non-members. Social non-members are not eligible for membership.
The veterans’ organization satisfies the section 501(c)(19) membership requirements because its members are all past or present members of the U.S. Armed Forces. The social non-members are treated as members of the general public for 501(c)(19) purposes. Income from non-member sources may be subject to the unrelated business income tax.
Interpreted by the IRS, SAL members are considered social non-members when they utilize a post's social activities (if the operations are not already open to the general public and paying UBI tax for the income derived), and may generate taxable income if a Legion post member does not sign in that individual and pay for all food and entertainment for the guest. This includes all social or recreational activities of a Post not related to one of the other exempt purposes of a 501(c)19. In all such activities, an SAL member is not considered a member of the organization; therefore, revenue generated by these non-members may be considered taxable income, unless a Legion post member officially signs the non-member into the post and pays for all their purchases and services or another exception to UBI is claimed (such as volunteer labor exception).
In summary, the SAL program should be viewed as a participatory initiative that fosters the development of youth into patriotic Americans as outlined in the SAL Preamble; to uphold and defend the Constitution of the United States, foster and perpetuate a true spirit of Americanism, preserve the memories of veterans from all wars, to inculcate a sense of individual obligation to the community, state and nation, to safeguard the principles of justice, freedom and democracy, to sanctify our friendship by our devotion to mutual helpfulness, and the last phrase; to adopt in letter and spirit all of the great principles for which The American Legion stands, and to assist in carrying on for God and Country, promotes American values and helps them become productive citizens in our society.
The SAL, as a program, is equivalent to an ALR chapter, Boys' and Girls' State, or Oratorical. All of them are Legion programs, but do not entitle participants or members to equal rights and privileges with veterans eligible for a TAL membership or to privileges commensurate with members of the American Legion Auxiliary. Certainly, no post would assume that a member of the Post’s American Legion Baseball team would have unfettered access to the post commensurate with what a Legionnaire enjoys, but some Posts then turn a blind eye to members of the Sons of The American Legion, despite the SAL also being a program.
In order to deal with these issues, we have long had rules governing program operations. Attached to this opinion, you will find our latest incarnation of those rules, along with an acknowledgement section to be signed by the program participant or leader as the Post or Department may determine. Together, these four rules governing Leadership, Rules, Reports and Controls apply to all programs of The American Legion, whether they are our exclusively Youth Programs (Oratorical, Boys State, Shooting Sports, etc.) or programs like the SAL or The American Legion Riders. Regardless of what the program is — whether it be an ambulance service, a rodeo, a yacht club, a cruiser club, or some other program — the four rules apply to each of them.
Best regards,
Mark C. Seavey, Esq.
National Judge Advocate, The American Legion
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Employer Identification Number (EIN)
Every Post shall have an Employer Identification Number (EIN) from the IRS. It does not matter if the Post has no employees. Federal Tax Regulations require that every organization required to file an Annual Information Return (Form 990) is required to have an EIN.
Before the 2007 tax year, Posts with gross receipts of $25,000 or less were not required to submit informational returns. With the enactment of the Pension Protection Act of 2006 (PPA), Posts are now required to submit an annual return.
- For the 2007-2009 tax years, Posts with gross receipts normally less than $25,000 could file a Form 990-N “Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 900 or 990-EZ.”. The first e-Postcards were due in calendar year 2008. The IRS offers free electronic submission of the e-Postcard.
- Beginning with the 2010 tax year, Posts with gross receipts normally less than $50,000 can now use the Form 990-N.
- Posts with gross receipts less than $200,000 and total assets less than $500,000 can use Form 990-EZ or Form 990.
- If gross receipts are greater than $200,000 or total assets are greater than $500,000, the Post must use the Form 990.
- If the Post is subject to Unrelated Business Income Tax (UBIT), the tax-exempt organization must also submit the Form 900-T and pay the appropriate taxes. See section later in this handout on UBIT.
- Form 990-N, 990-EZ, and 990 must be filed by the 15th day of the 5th month after the end of the Post’s annual accounting period.
- Penalties for Late Filings
- If a Post files its Form 990 after the due date (including any extensions), and the Post does not provide reasonable cause for filing late, the Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the Post’s gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for a Post whose gross receipts exceed $1,000,000.
- For Posts required only to complete the e-Postcard (Form 990-N), if the Post does not file its e-Postcard on time, the IRS will send you a reminder notice. There is no penalty assessment for late filing the e-Postcard, but an organization that fails to file required e-Postcards (or information returns – Forms 990 or 990-EZ) for three consecutive years will automatically lose its tax-exempt status.
A Post that fails to file the required informational return (Form 990-N, Form 990-EZ, or Form 990) for three consecutive tax years will automatically lose its tax-exempt status. The revocation of an organization’s tax-exempt status will not take place until the filing due date of the third year.
For the Post to have its tax-exempt status reinstated, it must apply (or reapply) for tax-exempt status using IRS Form 1024, Application for Recognition from Exemption. The Post must also submit IRS Form 8718, User Fee for Exempt Organization Determination Letter Request, and pay the appropriate fee. For Posts with annual gross receipts less than $10,000 during the preceding four years, the fee is $600. For Posts with annual gross receipts greater than $10,000 during the preceding four years, the fee is $850.
The IRS treats an incomplete return the same as a return filed late – the penalties are the same. For example, if a Post fails to attach a required schedule to its annual return – one of the most common errors in filing Forms 990 and 990-EZ – its return is considered incomplete and filing penalties may apply.
Even though The American Legion is recognized as tax exempt, the Post still may be liable for tax on its unrelated business income. For most organizations, unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption. A Post that has $1,000 or more of gross income from an unrelated business must file Form 990-T. A Post must pay estimated tax if it expects its tax for the year to be $500 or more. The obligation to file Form 990-T is in addition to the obligation to file the annual information return, Form 990-N, Form 990-EZ or Form 990.
If your Post operates a bar or dining facility or rents its facilities to non-members, you may be subject to UBIT.
Form 990-T, “Exempt Organization Business Income Tax Return”
The Form 990-T must be filed by the 15th day of the 5th month after the tax year ends. For additional information, see the Form 990-T instructions or IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations.
Contributions to a 501(c)(19) Veterans’ Organizations are deductible under Internal Revenue Code 107(c)(3). To be eligible to receive tax-deductible contributions under IRC 170(c)(3), at least 90% of the members must be war veterans.
Every employer, including a tax-exempt organization, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security taxes (FICA), and federal unemployment tax (FUTA) for such wage payments. The employer is also responsible for state tax withholdings and unemployment taxes.
On occasion, your Post may be required to provide proof of your tax-exempt status. If the Post does not already have a copy on file, it can request a copy of the IRS Determination Letter from the National Organization. The Post will receive a letter explaining the tax-exempt status of The American Legion and copies of the IRS letters granting tax exempt status to The American Legion and copies of the IRS group rulings. To obtain copies, contact the office of the National Judge Advocate at (317) 360-1224.
The American Legion is tax exempt under Section 501(c)(19) of the Internal Revenue Code of 1954 as amended. The American Legion is exempt from INCOME TAX unless there is income subject to Unrelated Business Income Tax (UBIT). In Tennessee, The American Legion Post may be sales tax exempt; refer to:
The American Legion Auxiliary is tax exempt under Section 501(c)(19) of the Internal Revenue Code of 1954 as amended. The Group Exemption Number (GEN) for the American Legion Auxiliary is 0964. The American Legion and the American Legion Auxiliary have different Group Exemption Numbers and are granted tax exempt status separately. Auxiliary Units must have their own Employer Identification Number (EIN) and must file their own Form 990 with the IRS.
The Sons of The American Legion (SAL) and the American Legion Riders (ALR) are programs of The American Legion. The activities of the SAL and ALR are the activities of The American Legion Post. The SAL and ALR use the same EIN number as the Post and their activities must be reported on the Form 990 submitted to the IRS by The American Legion Post.
Acting on constitutional authority, the Tennessee General Assembly authorized certain property tax exemptions for Tennessee’s religious, charitable, scientific, literary and nonprofit educational organizations. With limited exception, no organization is automatically exempt from the payment of property taxes, but rather must apply to and be approved by the Tennessee State Board of Equalization.
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