1. 168th Ekklesia Phi Gamma Delta Fraternity Housing Conference
Organizational and Financial Best Practices
Ron Sages (Ohio ‘73)
Director of Housing
The Fraternity of Phi Gamma Delta
August 12, 2016

2. Agenda Director of Housing Roles and Responsibilities
Organizational Issues
Financial Best Practices
Banking Relations
Accounting and Reporting
Auditing
Budgeting
Tax Considerations
Questions

3. Director of Housing Role and Responsibilities
Provide guidance to new colonies and reconstituted/existing chapters on acquiring housing
Provide resources & guidance on the formation of house corporations
Resource for promoting survival & continuity of house corporations
Resource and strategies for financing and funding needs
Maintaining and updating educational materials/resources and sample documents for house corporation use

4. Director of Housing Role and Responsibilities
Evaluate the need for training house corporation members and develop appropriate methodologies
Publish periodic e-newsletters specific to house corporation needs
Stay abreast of other housing developments throughout the Greek Community

5. 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 Annually
Board of Directors & Terms of Office

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

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

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

9. 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

10. Budgeting Operating Budget Capital 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

11. 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 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

12. Social & Recreational Club
§501(c)(7) vs. §501(c)(2)
§501(c)(7)
Social & Recreational Club
§501(c)(2)
Title Holding Company
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
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

13. Taxes Form 1024 (www.irs.gov) – Apply for EIN
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

14. Taxes When are 990-N, 990-EZ, 990, & 990-T due?
On the 15th day of the 5th 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

15. Estimated Taxes Estimated Tax Payment Dates & Percentages:
15th day of 4th month – 25%
15th day of 6th month – 25%
15th day of 9th month – 25%
15th day of 12th 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

16. 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

17. 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

18. 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

19. “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

20. Questions