Recognized Student Organizations
As a Registered Student Organization (RSO), your group is recognized by the University as an independent and separate organization from the University conducting itself as a nonprofit entity. Generally, student groups are legally independent and autonomous from the University and, therefore, do not have access to the University’s tax-exempt status.
Non-profit status may make a group eligible for certain benefits such as sales tax, property, and income tax exemptions. Recognition of Non-profit status or Tax-exempt status is not granted solely by the taxing authorities. Non-profit status can be a state law concept. An entity wishing to be recognized as Tax-Exempt and claim Non-Profit status must go through a state approval and registration process.
To qualify as Tax-Exempt from federal taxes, a group must meet requirements set forth in the Internal Revenue Code. For more information see Types of Tax-Exempt Organizations or Publication 557 on the IRS Website at www.irs.gov. The IRS also has excellent resource material on the life cycle of a tax-exempt entity on its website that explains the appropriate procedures that a group must take to be tax-exempt and to maintain its exemption.
To incorporate under the Texas Non-profit Statutes, RSOs need to contact the Texas Secretary of State office. To purchase items exempt from sales tax, RSOs must apply for Tax-exempt status with the Texas Department of Revenue (DOR). The application form, ST16, is available at the DOR website. If approved, the RSO will receive an ST17 with a sales tax exemption number. Additional information regarding starting a successful non-profit entity in Texas is available on the website of the Texas Council of Nonprofits.
Some groups have Tax-Exempt status through a group exemption from their national organization. Your national organization should have a standard form which you may use as the basis for your claim for exemptions. If this applies for your student group, you should contact your national chapter to see if you have Tax-Exempt status from the IRS, as well as state sales tax exemption for any items purchased at a store.
There are different types of tax exemption, based primarily upon the purposes of the groups, and not all are treated alike. Some of the following benefits are offered to some of these groups:
1. Exemption from federal and state income taxes.
2. A significantly reduced cost of mailing 200 or more identical pieces of mail at once.
3. Possible exemption from paying federal unemployment tax on payroll, stipends, wages, etc. All groups are required to withhold Social Security (FICA), Federal and State income taxes, and pay Texas unemployment tax on wages paid.
4. Donors’ gifts to student groups are tax-deductible under certain conditions. If you solicit large donations, this is important. Generally, your group must be registered as a 501(c) (3) group to benefit. This is an IRS designation for charitable, religious, educational, and scientific organizations.
5. Exemption from Texas sales tax can be obtained by charitable, religious or educational organizations on purchases for your group’s own use (tables, chairs, office supplies, etc.), but not from sales of tangible personal property or admission events.
Because of the complexities of this subject and because of regulations are subject to change, not everything can be covered in this document. It is recommended that you contact the IRS at www.irs.gov and request Publication 557, How to apply for and Retain Exempt Status for Your Organization, if you are interested in applying.
Tax ID Number or Employer Identification Number
Any student group that will raise money and, therefore, spend money, will need to maintain proper financial accounts for the group. These accounts should not be the same as any one individual’s account and should be set up by applying for a Tax ID or EIN specific to the group. Each taxpayer, or RSO, must have a Federal Taxpayer Identification Number (Tax ID). The organization should file Form SS-4 with the IRS to apply for this number. Any financial accounts created or maintained for the organization should be managed under this number.
APPLY FOR AN EIN:
• Go to the Online EIN application:www.irs.gov/businesses/small/article/0,ide=102767,00.html
• Read instructions and click on “Apply Online Now”.
• Read instructions and click on “Begin Application”.
• Scroll to bottom of list and select on “View Additional Types including Nonprofit/Tax-Exempt Organizations”, click “Continue”.
• Choose either “Community or Volunteer Group” or “Social or Savings Club”, depending on which best describes your group, click “Continue”.
• Read description to confirm your selection, click “Continue”.
• Fill out the rest of the information.
If the organization plans to sell tangible property or admissions to entertainment events and related activities, a Texas business registration number is also required. Sales tax will need to be collected on the sales and remitted to the state using the Texas registration number.