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.