NC POA State Tax Filing Form?Requirements

Started by JimmyS2 • 10 replies • 2309 views

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JimmyS2 (North Carolina)
Posts: 4

Posted:

Hi everyone! I'm new here and new to the association game having just been elected to the board. I need somehelp getting our ducks in a row. Here's the situation.

We have a small development of about 25 porperties in North Carolina. It has some deed restrictions and a "Property Owners Association" that was created at the same time as the restrictions in 1994. It's an unincorporated POA under common law that does not fall under the 47f rules (Planned Community Act). It's responsibilities mainly lie in the care of the community streets and a couple of signs.

To make a long story short, the POA has been messed-up since day 1. The developer who lives in the community was the president of the POA since it was created back in 1994. He's been collecting the annual dues from those that pay them and not collecting them from those that haven't paid them. The homeowners over those years have just gone with the program . . . until now.

The developer has been voted out of this office and a new board put in place after a couple homeowners got fed-up and called a meeting. I'm one of those new board members . . . UGH . . . since I don't have a long history in the development.

Anyway, we have a bunch of things to get in order. One of them is our tax filing responsibilities. I understand that we will need to ensure that we have/get an EIN number from the IRS and that we need to file Form 1120-H each year. However, I haven't found anything about our NC filing requirements.

I'm sure that there will not be any taxes due on the 1120-H form, but I'm concerned about North Carolina. I also don't expect there to be any tax liabilitied to the state, but I need to ensure that disclosures to the state are made if they are required. So, does anyone have an idea of what tax forms I need to file with the state, if anything, each year?

Again, we're:

POA and not an HOA,
Unincorporated, and
Pre-1999 (1994) common law association
Not subject to the North Carolina Planned Community Act (47f)

Thanks in advance for your advice on this issue.

SusanW1 (Michigan)
Posts: 5,202

Posted:

You don't mention a legal "turnover" from the developer.

If you don't have that, you can't incorporate anything, because you really don't exist outside of HIS business venture of building a subdivision.

JimmyS2 (North Carolina)
Posts: 4

Posted:

The "turnover" of the POA is addressed in the restrictions and POA documents. Without pulling them out for the exact words, they say that the POA is to be turned over to the homeowners at the earlier of 3 years after the POA was created in 1994, or upon the sale of a certain number of houses. In both cases, the standard was met. It was met in 1994 + 3 years (1997) and more than enough houses were sold a long time ago.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Jimmy:

Per your statement:

POA and not an HOA - This is generally just in the name of Property Owners Association vs. Home Owners Association they are potentially one and the same. They are both considered “Planned Community” under your states definitions.

(23) "Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. For purposes of this act, neither a cooperative nor a condominium is a planned community, but real estate comprising a condominium or cooperative may be part of a planned community. "Ownership of a lot" does not include holding a leasehold interest of less that [than] 20 years in a lot, including renewal options.

Unincorporated - As you are not incorporated I am not sure what you would need to file. This might be a question to call a local tax preparer to make sure regarding any documents to be filed.

Pre-1999 (1994) common law association
Not subject to the North Carolina Planned Community Act (47f)

Potentially you are still subject to certain provisions of the Act as noted below:

§ 47F 1 102. Applicability.

(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.

(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F 3 102(1) through (6) and (11) through (17)(Powers of owners' association), G.S. 47F 3 103(f)(Executive board members and officers), G.S. 47F 3 107(a), (b), and (c)(Upkeep of planned community; responsibility and assessments for damages), G.S. 47F 3 107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F 3 108 (Meetings), G.S. 47F 3 115 (Assessments for common expenses), G.S. 47F 3 116 (Lien for assessments), G.S. 47F 3 118 (Association records), and G.S. 47F 3 121 (American and State flags and political sign displays) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary, and G.S. 47F 3 120 (Declaration limits on attorneys' fees) applies to all planned communities created in this State before January 1, 1999. These sections apply only with respect to events and circumstances occurring on or after January 1, 1999, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities. G.S. 47F 1 103 (Definitions) also applies to all planned communities created in this State before January 1, 1999, to the extent necessary in construing any of the preceding sections.

(d) Notwithstanding the provisions of subsections (a) and (c) of this section, any planned community created prior to January 1, 1999, may elect to make the provisions of this Chapter applicable to it by amending its declaration to provide that this Chapter shall apply to that planned community. The amendment may be made by affirmative vote or written agreement signed by lot owners of lots to which at least sixty seven percent (67%) of the votes in the association are allocated or any smaller majority the declaration specifies. To the extent the procedures and requirements for amendment in the declaration conflict with the provisions of this subsection, this subsection shall control with respect to any amendment to provide that this Chapter applies to that planned community.

JimmyS2 (North Carolina)
Posts: 4

Posted:

Here are the exact words:

"Until the earlier of (a) three (3) years from the filing of this instrucment with the Office of the Register of the Deeds, or (b) the submission of at least fourteen (14) lots to the restrictive covenants for the subdivision, the Developers shall have full control, voting power, and management of the business and affairs of The Association . . . ."

There are now far more than 14 houses in the development and it's far past the 3 years outlined in the section.

Over the last two months, one homeowner and memeber of the POA called a meeting of the POA, which is allowed in the covenants. It met the quorum standards. Nominations were held for a new board. The Developer was there, as a resident of the subdivision and therefore a member of the POA. He presided as the current President of the board. He was available to be nominated, just like any other homeowner. However, he wasn't nominated. Others were nominated, voted on, and subsequently elected. It was all legal under the POA and restricitve documents.

JimmyS2 (North Carolina)
Posts: 4

Posted:

BTW, thanks Susan. I provided the additional information in the preceeding post.

And Janet, also thanks for that info. You did a lot of work pulling it up and reading it.

We're well aware of that section and have attorney's opinions on it. There is also NC case law on it that I have in our records. They all state that we're not subject to 47f. One of the key sections that you provided is: "and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities." That means 47f does not modify any existing sections of our common law agreement between the homeowners made in 1994.

The case law comes out of Wise vs. XXXXXXX XXXXXXX Community Association, Inc., Case #428A02. In a severe summary on my part, it was determined that the homeowners could still operate outside of 47f with their pre-1994 association and that they were "free to create almost any permutation of the homowners association the parties desire." It other words the court viewed it as a contract between homeowners under common law that operated as any other contract between any contractural parties. 47f did not apply to them.

So, does anyone know if there is a state equivelant of the federal 1120-H that needs to be filed with NC for our association?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Jimmy:

LOL … actually it is easy work for me.

In that case law there are statements the court made such as:
http://caselaw.findlaw.com/nc-court-of-appeals/1264570.html

We hold that the plain language of the Session Law enacting the PCA states that the power contained in section 47F-3-102(12) applies to homeowner associations formed prior to 1 January 1999.

We disagree with both interpretations. We hold that the plain language of section 47F-3-102 and the language of Section 2 and 3 of the certified transcript of the Session Laws grants specific powers to associations formed prior to 1 January 1999 “subject to the provisions of the articles of incorporation or the declaration and the declarant's rights therein.”

“Subject to” means that the Declaration and/or Articles of Incorporation can restrict or limit the power that the PCA grants to community associations created prior to 1 January 1999. Not allocating a power is different than limiting a power. The former is a condition precedent to receiving the power, and the latter limits the power already given. Plaintiffs' argument is overruled.

The trial court correctly held that the PCA provides the Association with the power to impose reasonable fines against its members. We must give effect to the plain meaning of G.S. § 47F-3-102. There is nothing contained in the Association's Articles of Incorporation or Declaration which limits the powers contained in G.S. 47F-3-102(12)

Essentially the association won by utilizing the fact the State PCA (Planned Community Act) Statutes allowed for lien by prior to 1999 associations, even if was not contained in the governing documents. While the state statutes do not modify your existing documents any items not stated in the governing documents will potentially fall under the state laws.

I am wondering if you may have misunderstood your attorney.

KayeC1 (North Carolina)
Posts: 1

Posted:

Did you ever find out if there is a NC tax form filing requirement for unincorporated associations? I am trying to figure out the same thing.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By JimmyS2 on 03/05/2012 2:40 PM

I understand that we will need to ensure that we have/get an EIN number from the IRS

You should have gotten an EIN prior to or when the Association opened it's bank account.

Does the Association have it's own bank accounts (your own meaning in the name of the Association)?

If not, that is step number 1.

Quote:

Posted By JimmyS2 on 03/05/2012 2:40 PM

that we need to file Form 1120-H each year.

You need to qualify to use IRS form 1120-H. If your only income is from assessments and your only expenses are Association expenses, then you probably qualify.

In addition to your Federal taxes, you will also need to file your State taxes.

Quote:

Posted By JimmyS2 on 03/05/2012 2:40 PM

However, I haven't found anything about our NC filing requirements.

Typically, State taxes are filed using corporate tax documents.

Quote:

Posted By JimmyS2 on 03/05/2012 2:40 PM

does anyone have an idea of what tax forms I need to file with the state, if anything, each year?

See this document from the North Carolina Dept. of Revenue:

http://www.dornc.com/publications/nonprofit2008.pdf

In addition to non-profit corporations, it also discusses unincorporated entities.

BTW - you may want to consider becoming incorporated as there are some benefits to it.
See What Is the Difference Between Incorporated & Unincorporated Businesses? article on legalzoom.com

JanetB2 (Colorado)
Posts: 4,219

Posted:

KayeC1 and Tim:

Was wondering if you noticed that this thread is more than two years old and whether new questions should be posted vs. opening old thread?

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By JanetB2 on 03/09/2014 11:26 PM
KayeC1 and Tim:

Was wondering if you noticed that this thread is more than two years old and whether new questions should be posted vs. opening old thread?

Doh!!!

Thanks Janet. I'm fairly good at catching that.

Kaye,

I did provide a link that may be helpful to your question.

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