social clubs

[gman]

I have a social club that another accountant worked on. Apparently they incorporated and file an annual franchise return. There is an application in there file for recognition for tax exempt status that was never filed. Must they file for exempt status or can they operate with out it. They have annual income of 10,500. and expense about the same. They operate a go-kart track for kids. The city provides the land to them. They have been in operation for 5 years.

Any suggestions?

thanks