THE INTRODUCTION OF THE COLLEGIATE HOUSING AND INFRASTRUCTURE ACT OF 2005 -- (Extensions of Remarks - April 08, 2005)
HON. PAUL RYAN
IN THE HOUSE OF REPRESENTATIVES
FRIDAY, APRIL 8, 2005
Mr. RYAN of Wisconsin. Mr. Speaker, I am today introducing legislation, along with my colleague Congressman BEN CARDIN, that would allow charitable and educational organizations to make grants to fraternities, sororities, and other collegiate organizations to provide housing and student facilities to the same extent that tax-exempt colleges and universities may provide such facilities for students. We introduced this legislation in the 108th Congress and it enjoyed wide bipartisan support.
By way of background, taxpayers may generally deduct contributions to nonprofit educational organizations (i.e., educational organizations described in section 501©(3) of the Internal Revenue Code ("Code")) such as colleges or universities. These colleges and universities may expend their funds (including donated funds) on student facilities such as dormitories, dining halls, study areas, libraries, computers, laundry facilities, physical fitness facilities, and social or recreational areas without jeopardizing their tax-exempt status.
State and private colleges and universities do not, and cannot, provide all of the housing and related student facilities necessary for their student bodies. Collegiate organizations such as fraternities, sororities, and other student associations (e.g., Muslim Students Association, Fellowship of Christian Athletes, and Hillel) fill a large part of the collegiate housing gap. Fraternities and sororities alone provide housing for more than 250,000 students each year. These student associations take on significant financial burdens in order to provide student housing without cost to affiliated colleges and universities.
Fraternities, sororities, and student associations provide collegiate housing through tax-exempt organizations, but their exemption comes under Code section 501©(7), with the result that direct contributions to these organizations are not deductible. However, educational organizations established to benefit these fraternities, sororities, and other student associations may qualify under Code section 501©(3) to receive deductible contributions.
The current IRS position is that it will not give a tax-exemption ruling to these educational organizations unless they limit student facility grants to those that are solely for educational use (with exceptions for minor social or recreational use). According to this IRS position, a fraternity foundation, for example, may make grants to a fraternity for the construction (or for annual operating expenses) in a fraternity house of a library, study area, computer area, or instructional area. The fraternity foundation may also make grants for computers, computer desks, and chairs, if similar to what is provided by the specific college with which the fraternity is associated, and for Internet wiring, if the specific college also provides Internet wiring. However, the IRS says that fraternity foundations may not make student facility grants for the construction or operation of sleeping quarters, dining areas, laundry facilities, or dedicated social or recreational areas (such as physical fitness facilities or equipment), or hallways or rooms used for both educational and other purposes.
Under the current IRS position, a charitable organization could not make a grant to a section 501©(7) collegiate housing organization (or to an affiliated section 501©(2) or ©(7) organization) to provide fire safety upgrades unless those upgrades were limited to areas that are solely for educational use. However, fire safety upgrades will not provide necessary protection unless they are made throughout an entire building. It has been estimated that just the cost of installing sprinklers in fraternity and sorority housing is over $300 million nationwide.
There is no policy reason for distinguishing between the types of student facilities that may be provided by a tax-exempt college and those that may be provided by another tax-exempt charitable or educational organization to a collegiate organization for the benefit of individuals who are full-time college students. The current IRS position, which we believe is an incorrect interpretation of the law, puts collegiate organizations at a significant disadvantage in obtaining the funds necessary to provide or maintain housing and infrastructure, including the funds necessary to provide fire safety upgrades.
I believe that clarifying that tax-exempt charitable or educational organizations may make collegiate housing and infrastructure grants will encourage private sector contributions to address student housing needs, thus relieving a burden that would otherwise fall on financially strapped colleges and universities. Accordingly, this bill provides that charitable and educational organizations may make grants to collegiate housing organizations (including affiliate organizations holding title to property) for the construction or operation of collegiate housing and infrastructure facilities that are of the type tax-exempt colleges are permitted to provide for their students, including, but not limited to, sleeping quarters, fire safety equipment and upgrades, dining areas, social and recreational areas, study areas, libraries, and computers and related furniture and wiring.
I urge our colleagues to support this important legislation.