Suspended Chapter Asset Management
Some house corporations may face a time when the active chapter charter is suspended by the general fraternity. This event leaves the house corporation with assets that must be managed without an active chapter to pay the carrying costs. There are typically both funds and real estate to deal with.
If a decision is made to sell the chapter house, what should happen to the sale proceeds and other funds held by the corporation? There are provisions of Sigma Chi Governing Law that may apply and the house corporation may have specific requirements pertaining to sales proceeds. Review the articles of incorporation
and bylaws for specifics. That not withstanding, consulting with a knowledgeable tax attorney, CPA or your Grand Trustee is highly advisable.
Does this mean the chapter house of a suspended chapter always be sold? The answer varies. If the house corporation holds title to a property in good repair that could be leased out until the chapter can be rechartered, then it may make sense to follow that course of action. However, if the house is in need of significant repair, structurally unsound or unsafe, the best course of action may be to sell. Regardless of the circumstances, the house corporation is charged with prudent action so consulting with a CPA and an attorney is highly recommended.
There may be significant tax consequences when a house corporation sells its house. Regardless of a corporation’s non-profit status, the sale of house corporation-owned property may be subject to capital gains and other taxes. A tax-free exchange under the IRS code might be a means to minimize a taxable event. A knowledgeable real estate attorney or CPA can explain available options.
While a charter suspension is a disheartening event, it often also provides another chance to do it better when rechartering can be accomplished. We commend you who serve unselfishly to provide safe and adequate housing to our undergraduate brothers.
By Grand Trustee Harvey Silverman.