For a practical example of how to execute the 4F strategy I'm going to use [Zo House SF](https://zo.xyz/house) as an example. **I am not affiliated with Zo House at all and have not vetted the project it is just used here as a convient example** In the US there are [34 different types](https://www.irs.gov/charities-non-profits/other-tax-exempt-organizations) of Non-Profit Legal Entity. Remember Non-Profit doesn't mean Yes-Loss it just means that any budgetary surplus can't flow to share holders or a single individuals. For this specific use case there are two type of Non-Profit Legal Entity that could work as legal structures for making the Zo House operations completely Non-Profit, while maintain legal compliance and legibility. Those being [501(c)(10)](https://www.irs.gov/charities-non-profits/other-non-profits/fraternal-societies) and [501(c)(7)](https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs), I will walk through the requirements for both and how Zo House could theoretically meet them. [501(c)(10) : Fraternal societies ](https://www.irs.gov/charities-non-profits/other-non-profits/fraternal-societies) To be exempt under IRC 501(c)(10), a domestic fraternal society, order, or association must meet the following requirements: 1. It must have a fraternal purpose. An organization has a fraternal purpose if membership is based on a common tie or the pursuit of a common object.  The organization must also have a substantial program of fraternal activities. This requirement is essentially saying that their has to be a common goal amongst the members that the organization supports via facilitating rites, rituals, and activities. For Zo house there is such a design space here. There are two paths that jump out at me, one is the understanding of the world through the understanding of crypto-morality, and the pursuit of power through memetic warfare. Both of these could be dressed in fun language which the rites being almost like a game wherein your Zo house NFT interacts with a smart contract to change it into a form that represents your acquired knowledge and moves you up a degree 2. It must operate under the lodge system. Operating under the lodge system requires, at a minimum, two active entities: (i) a parent organization; and (ii) a subordinate organization (called a lodge, branch, or the like) chartered by the parent and largely self-governing. This one is quite trivial it just involves setting up another organization to act as the chartering parent org 3. It must not provide for the payment of life, sick, accident, or other benefits to its members. The organization may arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. Self explanatory 4. It must devote its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes. This one is also quite trivial as with a well designed common goal and fraternal activities many things can be classified as Fraternal purposes 5. It must be a _domestic_ organization, that is, it must be organized in the United States. Again self explanatory [501(c)(7) : Social Clubs](https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs) - The club must be organized for [exempt purposes](https://www.irs.gov/charities-non-profits/other-non-profits/exempt-purposes-code-section-501c7 "Exempt purposes - Code Section 501(c)(7)"). Recreation is an exempt purpose which Zo House fulfills - The club must provide an opportunity for [personal contact](https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs-requirements-for-exemption-personal-contact-required "Social clubs – Requirements for exemption – Personal contact required") among members and [membership must be limited](https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs-requirements-for-exemption-limited-membership "Social clubs – Requirements for exemption – Limited membership"). Both requirements are satisfied by Zo House being a physical location as well as it being gatekept to it's holders - The club must be [supported by membership](https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs-requirements-for-exemption-support-by-membership-dues "Social clubs – Requirements for exemption – Support by membership dues") fees, dues, and assessments. This is a little sticky but could probably be circumvented by using crypto for most transactions and having members pay minimal dues - The organization’s net [earnings may not inure](https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs-requirements-for-exemption-inurement-prohibited "Social clubs – Requirements for exemption – Inurement prohibited") to the benefit of any person having a personal and private interest in its activities. To DV this may be a con but for the NFT holders this is a pro it just legally enshrines it being a community not a rug - If the club exceeds [safe harbor guidelines](https://www.irs.gov/charities-non-profits/other-non-profits/nonmember-income-of-tax-exempt-social-clubs-what-is-it "Nonmember income of tax-exempt social clubs - What is it?") for nonmember and investment income, the facts and circumstances must show that it is organized substantially for exempt purposes. See “Effect of Nonmember Income on Exempt Status" below for more information. This is a counter to the earlier rule because there are circumstances where having funding not from dues that exceed 35% of total income doesn't jeopardize your exempt status. - The club may receive de minimis income from [nontraditional sources](https://www.irs.gov/charities-non-profits/other-non-profits/traditional-and-nontraditional-business-activities-of-tax-exempt-social-clubs "Traditional and nontraditional business activities of tax-exempt social clubs"). - The club's governing instrument may not contain a provision that provides for discrimination against any person on the basis of race, color, or religion. This is trivial Both of these types of organizations also are considered exempt [under California's tax law](https://www.ftb.ca.gov/file/business/types/charities-nonprofits/types-of-exemptions.html#23701l). In this scenario you write a reference to the smart contract in the membership rolls and club bylaws essentially saying that the NFTs act as membership "bearer shares" wherein the legal person in possession of the NFT is default considered a member. Alternatively you can try and say that the membership roll is actually just the smart contract itself. With either one you also setup a [501(c)(2)](https://www.irs.gov/pub/irs-tege/eotopicc86.pdf) to hold the property titles. And with the several strokes of a pen you have tax free property legally owned by a non-profit representing the interests of token holders.