New Tax Rule Lets Charities Fund College Frat Houses and Dorms—But Not Gyms

The Collegiate Housing and Infrastructure Act of 2025 is short, but it packs a punch for anyone interested in how non-profit money gets spent on college campuses. In short, this bill changes the tax code to make it much easier for charitable organizations—the 501(c)(3) groups—to funnel money directly into college housing projects run by social or athletic groups, like fraternities, sororities, or sports clubs (the 501(c)(7) groups).

The Tax Loophole for Campus Housing

Under current law, if a typical charity gives money to a private social club, it risks losing its tax-exempt status because that money isn’t going toward a strictly charitable purpose. This bill carves out a major exception: a 501(c)(3) can now give a “collegiate housing and infrastructure grant” to a 501(c)(7) group specifically for building, fixing up, or maintaining student housing without any penalty to its charitable status (Sec. 2). Crucially, this also means that when you donate to that charity, your contribution remains tax-deductible. Think of it as a clear, government-approved pipeline for charitable dollars to flow into campus real estate.

What Counts as a Qualifying Project

To qualify for this special treatment, the money must be used on housing where “substantially all” the residents are full-time students at the local college (Sec. 2). This is about making sure the funds are actually supporting student life, even if the housing is managed by a private group. For example, a grant could pay for a new roof, upgraded electrical systems, or even the construction of an entire new facility for a university-affiliated organization. However, the bill draws a curious line: these grants cannot be used to fund physical fitness facilities. So, a charity can pay for a new kitchen in the frat house, but they can’t pay for the new weights in the basement gym. This distinction is important because it tries to separate the “housing” benefit from the “recreational” benefit.

The Real-World Money Question

So, what does this mean for the average person? First, it increases the funding pool available for college housing. If you’re a student, this could translate into newer, better-maintained housing options, especially if your organization has a dedicated alumni foundation that wants to help out. Second, it raises a question about resource allocation. Charitable dollars are finite. By giving preferential tax treatment to funds flowing toward private social clubs—even for housing—it could divert resources that might otherwise go toward public-facing charitable efforts like food banks, medical research, or general university scholarships. The vagueness of “substantially all” residents also leaves room for interpretation; does that mean 80%? 95%? That lack of a concrete number could lead to disputes about who gets to live there while still qualifying for the tax break.

Ultimately, this bill provides regulatory certainty for charities that want to invest in campus infrastructure, making it easier for alumni groups to support their organizations’ physical properties. But it also formalizes a path for tax-deductible funds to support the private real estate needs of specific social and athletic clubs, which is a notable shift in how we define charitable giving in the context of higher education.