Stately and stylish architecture is important, but in Greek housing design, the tax attorney and the fundraiser must play a role too, because all square feet are not created equal in the eyes of the IRS, and oversights can be costly to projects and donors alike.
The Education Tax Deduction is an imperative that Greek organizations can leverage when raising financial support for construction. But the allowance is frequently overlooked until the design stage is well underway, leaving fewer opportunities to earn benefits for those who support projects, said Mark Krittenbrink, president of Krittenbrink Architecture.
Under the law, donors can give money to Greek charities, who in turn help fund construction projects for Greek housing. It is legal for donors to receive a tax deduction on their charitable giving when architectural plans comply with federal regulations on what is considered dedicated educational space that has “exclusive function” within a sorority or fraternity house.
“There are many creative, legal ways we have helped our clients maximize the Education Tax Deduction for their donors,” Krittenbrink, said.
The square footage of a house is divided into three categories of space. They include educational, noneducational, and ancillary, he said. Educational space includes study lounges, libraries, and heritage rooms. Noneducational spaces include sleeping areas, kitchens, and chapter rooms, while ancillary space includes utility areas such as bathrooms, foyers, and storage rooms.
Under the tax rules, organizations qualify for a benefit on the percentage of square footage dedicated to education. Before calculating that percentage, however, organizations can set aside square footage taken up by bathrooms, hallways, and other utility spaces.
“The ancillary square footage is not insignificant. Getting all of that off the page really helps. The rules are clear, so you really want to take advantage of opportunities to max that out,” he said. “Then, you have a new denominator on which to base your percentage.”
Consider a 30,000-square foot house that has 10,000 square feet of educational space, 10,000 square feet of noneducational space and 10,000 square feet of ancillary space. By eliminating ancillary space from the percentage calculation, the tax benefit improves from 33.3 percent to 50 percent, which would represent a significant tax benefit to donors.
Under the tax rules, there also are opportunities to increase the percentage of educational spaces within a house, he says.
Formerly, a study hall was just that… a hall lined with study carols and desks. Those days are gone. Today’s student is as likely to study lying on the couch with headphones on to sitting at a table, poring over books. So, a study hall needs to become a study lounge, where students feel free to study in their own personal style.
Krittenbrink remembers a study lounge he designed in a sorority house on the Oklahoma State University campus.
“At one end of the room was a large sectional with comfortable chairs. At the other end were two big library tables with library lamps, and the tables were wired, so you could just sit down and plug your computer into a port.”
“When I went in to photograph that building, it was being used for studying in many ways,” he said. “It was awesome, because you had a couple of girls lying on the couch and studying, while you had girls working at the library tables,” he said. “Since people study with laptops, phones and tablets, it’s possible to study in all parts of the room.”
To achieve your highest square footage goals, you need to look at the private space—the bedrooms. A clear separation of sleeping and study functions can be defined and accepted in order to (potentially) include this as educational square footage. “It’s all about thinking outside the box and working with legal experts to determine what usages fit within the criteria,” he said. “It’s a very fine line.”
The process of renovating, expanding or building Greek housing should always begin with discussions and collaboration. By working together, the architect, the tax attorney, and the fundraiser can ensure project designs serve the academic and lifestyle needs of students while providing the tax benefits benefactors desire.