non profit

Started by DorrinndaF • 6 replies • 1378 views

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DorrinndaF (Michigan)
Posts: 17

Posted:

We were founded as a non profit homeowners improvement association over 40years ago - a 501(c)4 to be exact. I have just been informed we no longer are a non profit. The board did not like the clause common areas must be open to the gerneral public. The board has now relinquished the non profit status to allow the common areas to now serve the community (home owners). However they never informed the members and to my knowledge do not intend to inform the members? Have they acted in good faith or should the members have had a say?

SueW6 (Michigan)
Posts: 814

Posted:

Your Board either neglected to "renew" your non-profit status with the IRS OR has dissolved the corporation. In either case, the membership MUST approve either of these steps.

There is also the State of Michigan Annual Report that had to have been filed every October. If that is not done, the State no longer sees you as a corporation.

Find out where you are with the IRS and the State of Michigan.

SueW6 (Michigan)
Posts: 814

Posted:

The Board has also misinterpreted the meaning of "general public access" of commons area owned by privately.

Get a Real Estate attorney ASAP to set them straight.

(Michigan is real loosey-goosey as far as homeowner associations are concerned. They do have a Condo Act, but the HOAs are left to the general non profit corporation laws.

(Our Association was founded as a non profit in 1946. We "renew" every 25 years.)

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The IRS is responsible for the non-profit status. The board would have had to fill out some paperwork to change it. Which would also entails they need to change your entire documentation to reflect this change. This change has to be reflected in your CC&R's and Articles of Incorporation. Which if you make changes to those documents, that takes Homeowner majority approval. It's a breach of contract for future owners if the documentation does not state it's a non-profit.

It's time to get a tax or corporate type lawyer NOT a Real Estate one. HOA's don't deal with real estate but are corporations. This situation requires someone familiar with corporate set up. Seems to me there is more to this than the "Public use" translation. Seems to me they may have found out the non-profit isn't one that you can contribute charity wise. Which my bet would not be surprised to find out there were board members trying to contribute donations to use it as a tax write off and got caught... However, I also see the point where they don't understand what the public use reference meant either. It means public use of the homeowners not the general public. The city can't just come in and put a playground in unless your HOA turned over the property to the city. Otherwise, it's still private use but for all HOA members.

Former HOA President

DorrinndaF (Michigan)
Posts: 17

Posted:

They say we're still non profit for state but for Feds were no longer a 501(c)4 .. It's confusing! But that aside we were never notified and it was never voted on - what now?did the association act within its power.

SueW6 (Michigan)
Posts: 814

Posted:

The Board secretary is responsible for safe-keeping of all the legal documents of your association. (minutes, bylaws, etc.)

You should demand to see the exact status the IRS has granted - or withdrawn - for your group IN WRITING.

The Board has filed with the state as a corporation, but you are unclear as to what kind it is.

Let us know. This sounds very confusing.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You may be able tohold a special meeting to discuss the issue. Bring the results to the board on their actions consequences to set things right. You also can recall the board with enough votes to remove them. Make sure to have enough volunteers to replace them.

Suing your HOA is suing yourself and your neighbors. Going to a lawyer can be costly on all ends. If you all need to sue, then make this a class action suit. Which if you do that, should have enough votes to remove board or rewrite the rules instead of sue.

This will need an accountant feed back. They may be able to explain this better. IRS has to agree to the new status. Which needs more proof and verification. The difference for no longer being a non profit needs to be documented. It also needs to make sure the budget reflects how paying taxes will factor in.

Former HOA President

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