PHOENIX - A Senate committee approved a bill last week to exempt fraternities and sororities from property tax if they buy a fraternity house from a university in Arizona.
The bill, sponsored by Sen. Dean Martin, R-Phoenix, expands property tax exemptions for independently owned fraternity and sorority houses.
As the law is written, fraternity houses are exempt from property tax while owned by a university. However, once an outside buyer purchases a house and property from the university, they become eligible for property taxation.
The bill, SB1082, would change the law so that fraternity and sorority houses would be exempt even after they are purchased from the university, as long as they are owned by a not-for-profit organization classified as 501(c)(7) under the Internal Revenue Code.
As defined by the Internal Revenue Code, 501(c)(7) applies to organizations or social clubs "organized for pleasure, recreation and other similar non-profitable purposes," which encompasses university fraternities and sororities.
Gary Ballinger, UA Greek Life coordinator, said that the UA does not own any fraternity or sorority houses on or off campus, but that it does own the land where the Alpha Chi Omega, Kappa Sigma and Sigma Alpha Epsilon houses are, so those houses do not fall under the proposed exemption.
The Sigma Pi fraternity house, 1525 E. Drachman St., is owned by a not-for-profit housing corporation, said James Wie, business management senior and former Sigma Pi president.
Wie said all members would save money if the fraternity qualified for the exemption.
"To have that (exemption) is definitely going to save all fraternities quite a substantial amount of money in terms of dues," Wie said.
Sen. Martin wrote the bill after seven fraternities purchased houses from Arizona State University in the past five years, only to learn that after the sale, they would have to pay the property tax they thought they were exempt from.
Martin also said the property tax has varied quite a bit in the few years the fraternities have owned the houses.
"The county assessor does not know how to assess it," Martin said. "It is a real difficult property to try to assess."
Martin said the difficulty lies in the tax code, 501(c)(7), because it was unclear whether this classification was included in the law.
The bill also says the 501(c)(7) fraternity and sorority houses must be used for student housing to be exempt from property tax; they cannot be used only for meetings, Martin said.
If passed, the bill will clarify the tax exemption, Martin said, and would apply to all houses in the applicable tax code no matter when they were purchased.
"The exemption would start next tax cycle," he said. "It's not retroactive, we're not refunding previous (taxes), just from this point on they are exempt," he said, if the bill passes.
Kevin Truitt, president of Beta Theta Pi fraternity, 645 E. University Blvd., said the savings from the exemption would most likely be seen in rent costs.
"From a financial standpoint, especially, for our house it would help us keep some of our money; that'd be great for us, we'd be all for it," said Truitt, a physiology junior.
The bill will now go to the Senate Rules Committee, and if approved, will be voted on by the Senate as a whole. If the Senate passes the bill, it will go through the same three-step process in the House of Representatives. If successful, Gov. Janet Napolitano will be the deciding factor in signing the bill into law.