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 registrations. 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).
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 fingers pointing. The national organization’s wanting to limit its liability exposure, to this end they tell the chapters (or give them a memo) once “file your 990 with the IRS annually”. Schools point to the national level for this “follow your national guidelines on tax exemption”. The result is a cold war shuffle students aren’t properly trained on how to take care of state and federal requirements, 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, the 990 is an information return that tax exempt organizations file instead of their 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 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 and 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 annual corporate 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 make sure chapters are remaining compliant.
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 4,500 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.