1. 166 th Ekklesia Housing Conference

2. Organizational and Financial Best Practices Ron Sages (Ohio ‘73) Director of Housing The Fraternity of Phi Gamma Delta 203-255-9993 x201 rsages@chapinasset.com

3. Circular 230 Disclosure IRS CIRCULAR 230 DISCLOSURE: To comply with requirements imposed by the Department of the Treasury, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein

4. Organizational Issues Form of Organization Registration with Secretary of State Designation of Individual for Service of Process Filing with Internal Revenue Service Form 1024 Form 990 - Annually Board of Directors & Terms of Office

5. Financial Best Practices Banking Relations Accounting & Reporting Auditing Budgeting (Operating & Capital) Taxes

6. Banking Relations Convenience Accounts – Checking, savings, and security deposit Investment Accounts Credit Facilities – Mortgage – Line of Credit – Corporate Credit Card Credit Card processing

7. Accounting & Reporting Fund Accounting or Traditional Corporate Selection of Fiscal Year End Frequency of reports – Board of Directors – General Membership – Historical Information

8. Auditing Internal Audit (multi-purpose) – Ensure conformity with generally accepted accounting principles – Promote integrity and confidence in housing corporation financial activities and practices – Circumvent any unintentional omission or recognition of involvement or donations by graduate brothers

9. Budgeting Operating Budget – Heuristics: Mortgages – 28% - 30% of Annual Gross Income – Commercial Mortgage Terms generally shorter than Residential Mortgages (i.e., 10 to 15 years) – Commercial Mortgage rates generally variable with floor Fund Annual Insurance Retention Fund Depreciation and Amortization Expense Capital Budget – Plan for and cycle work that can generally best be accomplished during school closure periods

10. Tax Considerations Generally house corporations recognized under either IRC §501(c)(2) or §501(c)(7) In general, member source income (“exempt function income”) avoids income taxation Income from other sources (UBTI) subject to income tax @ Corporate Income Tax Rates Contributions made to (c)(2) or (c)(7) entities not deductible by donors No profits/assets may inure to any member

11. 501(c)(7) vs. 501(c)(2) 501(c)(7) Social & Recreational Club Broader charter than 501(c)(2) Exempt Function Income extends to member dues, contributions, etc. UBTI & non-member income permitted subject to “safe harbor” threshold limitations Income accumulations permitted “Set asides” may be made for charitable purposes 501(c)(2) Title Holding Company Exclusive use is to hold title to property, Collect income thereon, & Remit net income to a tax exempt organization Cannot have UBTI other than what is classified as such due to debt financing of property owned Cannot accumulate income Cannot engage in broader activities

12. Taxes Form 1024 (www.irs.gov) – Apply for EINwww.irs.gov Annual Filings - Form 990, 990-EZ or 990-N? – Gross Receipts < = $50K, Form 990-N – Gross Receipts > $50K & < $200K, Form 990-EZ – Gross Receipts >= $200K or assets >= $500K, Form 990 Form 990-T? – UBTI > $1K

13. Taxes When are 990-N, 990-EZ, 990, & 990-T due? – On the 15 th day of the 5 th month following close of taxable year. If Corporation has previously filed a 990-T with a tax liability, and expects to owe more than $500 for the current year, the Corporation is required to make Estimated Tax Payments during the current year

14. Estimated Taxes Estimated Tax Payment Dates & Percentages: – 15 th day of 4 th month – 25% – 15 th day of 6 th month – 25% – 15 th day of 9 th month – 25% – 15 th day of 12 th month – 25% Required Annual Payment (not “large” corps.) – Lesser of 100% of current year tax or 100% of prior year tax liability, unless prior year tax liability was $0

15. Tax Considerations Revenues – Member Source Income (“exempt function income”) – tax exempt Dues & gifts Pig Dinner receipts Room rents – Unrelated Business Taxable Income (UBTI) – taxable Interest, dividends and capital gains Non member source income Rents and royalties

16. Taxes Conditions for maintaining 501(c)(7) status: – >35% of Gross Income from non-member sources – >15% of Gross Income from non-member use of club facilities & services – Facts and circumstances to be reviewed in terms of loss of 501(c)(7) status

17. Taxes Investment Income – no distinction between: – Qualifying and non-qualifying dividends – Long term and short term capital gains UBI less applicable deductions (“tier system”) = UBTI Specific Exemption of $1K per year unless part of an “affiliated group” Net UBTI is taxed at Corporate Income Tax Rates

18. “Set-Asides” UBTI that is specifically “set aside” for religious, charitable, educational, scientific, literary, & for prevention of cruelty to children or animals (IRC 170(c)(4)) is exempt from income tax. – More than an accounting entry – Funds must be segregated by due date for return

19. Questions