Group Exemption Management Requires Form 990 – Everyone Must File!

by Jack Englund on Sep 14, 2023

Have you ever had a group project where someone just didn’t pull their own weight? It made it harder for everyone else. Maybe you recently took a canoe down the Colorado River with your friend Paul, and when you hit the rapids, Paul just took his paddle out of the water. Or worse, Paul started panicking and flipped the whole canoe over. Managing your group exemption is the ultimate group project. Making sure everyone files form 990 is a major part.

New Rules Are Coming…

When managing your group tax exemption with the IRS, ensuring your subordinate members file their 990-series return every year is like ensuring everyone does their part of the group project. The IRS requires group exemption holders to supervise/control its subordinate chapters. On June 12, 2020, the IRS issued new proposed rules that defined and strengthened this requirement.

Just Keep Paddling!

The newly defined rules require group exemption holders to educate their subordinates on the annual filing requirements of Form 990. This also means that the group exemption holder must obtain, review, and retain a copy of each subordinate 990, each year. The IRS wants to know that Paul, and everyone else, kept their paddles in the water.

What if We Don’t?

This one is simple: In the newly proposed rules, the IRS indicates that if 50% or more of its subordinate organizations do not file their 990, which ultimately leads to the auto-revocation of said subordinate groups, the canoe will likely flip. As a result, the organization will be at risk of losing its group exemption.

Form 990 is Crucial.

Filing your 990, and ensuring that all your subordinate members file their 990 every year, is crucial to the survival of your group exemption. The new rules for group exemption management are coming. When they arrive, the IRS will be looking to enforce their policies and you do not want your organization to be the one that gets caught without a paddle!

RENOSI is the leader in helping national organizations set up and manage affiliate chapters. Setting up local, regional and state affiliate chapters is an excellent way to grow your national organization. Managing hundreds and even thousands of chapters, however, is time-consuming and difficult.

Since its inception, RENOSI has provided a simple and stress-free solution to help obtain and maintain tax-exempt status for over 6,000 nonprofits. With the interactive myRENOSI dashboard, our partners can organize their state and federal registrations, allowing our team of experts to help ensure your tax-exempt status is not revoked.

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So, whose problem is tax-exempt status for Greek organizations?

Jack Englund

Sep 20, 2022

Earlier this month I went on a road trip. The main goal was to visit a few college campuses to share resources on what Greek Organizations need to do to maintain their tax-exempt status with the IRS and stay in good standing with state registration requirements. I also had a gimmick planned to give out cash to a few students along the way. Tax-exempt status and incorporation are crucial steps needed to protect the legacy of Greek organizations. Along the way, I ran into a common refrain — "We don’t handle that on our campus."

70% of chapters lose their status in 3 years.

When my ATO chapter got its charter at Stetson University, Wynn Smiley (the CEO of ATO) came into our chapter for a workshop on building a successful chapter. One of the observations from his years of working with chapters was that most chapters that fail and close, fail in the third year. This was for several reasons, not taking recruitment seriously being the foremost. This statistic, however, goes far beyond whether or not a chapter will thrive. Based on RENOSI’s audit of the IRS Tax-Exempt Organization Search (TEOS), around 70% of Greek organizations lose their IRS tax-exempt status after three years of existence. More drop their state incorporation after just a year (if they even had it at all).

So, the school doesn’t look it. What about nationals?

The obvious answer is if around 70% of chapters lose their tax-exempt status, then it doesn’t matter who is watching — it's like burning popcorn and keeping the microwave running. When it comes to Greek organizations, RENOSI has found a lot of finger-pointing. The national organization wants to limit its liability exposure. To this end, they tell the chapters (or give them a memo) once to "file your 990 with the IRS annually." Schools point to the national level for chapters to "follow your national guidelines on tax exemption." The result is a Cold War shuffle where students aren’t properly trained on how to take care of state and federal requirements, and chapters aren’t provided oversight to make sure their filings are getting done. After three years of not filing a 990 with the IRS, the chapter loses its tax-exempt status automatically.

What has to be filed?

Two reports need to be filed annually by any Greek organization. The first is the IRS 990, an information return that tax-exempt organizations file instead of an annual tax return. The 990 is due on the fifteenth day of the fifth month after a chapter’s fiscal year ends. The report goes on to tell the IRS what the chapter brought in and spent. A 990 can be anywhere from a simple fill-in-the-blank form to something much more complicated if a chapter is bringing in more than $50,000 annually. The second report is a corporate annual report filed with the chapter’s state. The annual report is often very simple and is used to keep the state updated on who is operating the organization and where they are located. Filing both reports keeps the organization in good standing with the state government and more importantly, maintains federal tax-exempt status.

How can students be empowered to know what they need to do?

RENOSI recommends colleges and universities with Greek life systems incorporate annual filings into their annual requirements for chapters to remain in good standing on campus. When I was at Stetson, we called it the "Foundations of Excellence" packet. The packet included philanthropic activities, required community service hours, GPA requirements, and more. At the end of such a packet, RENOSI recommends adding boxes for the corporate annual report and the IRS 990 being filed. Once a chapter takes care of these, they can include a copy of their report to the Greek life office to help show that chapters are remaining compliant.

Greek Boss is on the road!

Jack here! I’m hitting the road to introduce RENOSI and Greek Boss . So far, I’ve been to 10 states. More travel is coming! I can’t wait to share Greek Boss with more student leaders and Greek Life Advisors!

In late September, the Texas tour takes off! I’ll be visiting Alabama, Louisiana, and traversing the great state of Texas.

Let me know if you’d like me to stop by your school. I can even do a workshop for your students!