IL rules regarding self-managed board members receiving compensation

Natalie,

Welcome to the forum.

One needs to remember that Directors and Officers are two different positions, even if the positions are filled by the same individual. It's like having two jobs.

Typically, Directors may not be compensated for their work.

However, Officers may be compensated (but I don't recommend it for the perception reasons you are experiencing).

If an Association is paying Officers, they need to be doing it properly.
1) Assessments should be paid in full. No discounts.
2) Checks should be issued for any compensation.
3) IRS rules need to be complied with (are they an employee or independent contractor).
4) W2s or 1099s need to be issued.
5) Officers who receive compensation should be informed that they lose some protections that apply to unpaid volunteers (because payment means that they are professionals).

Therefore, paying the Treasurer is likely not breaking any laws.
However, the way the Association is paying the treasurer likely is.

If the person is deemed to be an employee, then the Association must pay their share of employee taxes and withhold the employees share.

If the person is deemed to be an independent contractor, then all supplies should be providied by the individual and not the Association.

See:

Independent Contractor (Self-Employed) or Employee? from the IRS website

Why Paying Your HOA Board Members is a BIG Mistake from an HOA management blog

No One Has Time to Volunteer for HOA Board -- Can We Pay Them? from nolo

To pay or not to pay? A closer look at board compensation 2014 article in the Chicago Tribune

Should Board Members Receive Compensation? an article by a legal firm

This is very important. If compensation is allowed, by the governing documents and state statutes, that needs to be paid separately and not applied as a credit against assessment obligations.

Lets put this another way.

Unless the governing documents authorizes a Board to waive assessments (which is essentially what your Board is doing) they may not waive assessments.

Charges (fines, late fees, etc.) can typically be waived because the wording that authorizes them makes them optional.

Even if your Board chooses to waive assessments, then they must also file and issue a form 1099-C, cancellation of debt. This requires the receiver of the form to include that amount as income.

Thanks, everyone. That was mostly what I'd found, too. I found some other information that says board members aren't supposed to receive any compensation, and a coworker who has been president of his board told me this.

Our bylaws say "Each member of the Board shall hold office until a successor shall have been duly elected and qualified; provided that board members may succeed themselves. Members of the Board shall receive no compensation for their services, unless expressly allowed by the Board and approved by the Owners having two-thirds (2/3) or more of the total votes."

There is no addendum in the CC&Rs that I received at closing to imply that there was a ruling that stated the treasurer and maintenance guy (who is not even a board member) are to be paid. However, in living here these two months, I have learned that everyone's very casual about every issue that crops up, so it's possible there's a written addendum that was just never given to me because someone along the way wasn't organized. Frankly, I don't think anyone should be getting compensated, but I don't want to stir the pot too much if I am elected, so confirming that we can 1099 board members for whatever amount their dues are being discounted will certainly help.

Does anyone know if it's possible to receive CAM license study materials for free or a low cost? If elected, I'll want to study up on laws, but I don't know if I can take the time or the expense to actually take the test. I'm very experienced in property management, but it looks like the only skills and knowledge that might transfer from that career are resident relations and vendor management. I don't have any idea about filing taxes or budgeting what percentage of dues should be used for reserves vs. utilities vs. upkeep like landscaping and common area cleaning.

The current president, who nominated me, called the position president of the board. However, there are only 12 units and three owners who actually hold titles (president, treasurer, secretary). All owners vote on who will hold the positions, and all owners currently attend board meetings. Is this association maybe omitting the board altogether and calling officers the wrong thing? Or are they all maybe directors and officers?

Got it. Thanks for clarifying that! It looks like this particular community uses the word "board" and "officer" interchangeably. Did I mention the CC&Rs weren't rewritten since the founding of the HOA in 1993? It appears that there was a board before there were enough owners here to elect the amount of officers the CC&Rs wanted. It sounds like they let every owner vote for officers as well as any other incidental that arises.

With that confirmed, can officers be compensated for their role in managing an HOA?

As I said earlier, Officers may be compensated providing the governing documents do not prohibit it.

HOWEVER due to tax liabilities, loss of some legal protections that unpaid volunteers receive and potential perception issues (I pay your salary, do as I say) it is strongly discouraged.

IF one is going to pay officers, do it properly and file all necessary tax forms and pay all necessary taxes. The Association doesn't want to be on the receiving end of the IRS when a disgruntled member contacts them and says the Association is paying employees under the table.

Here is a link for your State Condo Statutes:

http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2200

When I mentioned the assessments and common expenses and why should not have BOD members not pay is because many state statutes will state something similar to yours such as:

Sec. 9. Sharing of expenses - Lien for nonpayment.
(a) All common expenses incurred or accrued prior to the first conveyance of a unit shall be paid by the developer, and during this period no common expense assessment shall be payable to the association. It shall be the duty of each unit owner including the developer to pay his proportionate share of the common expenses commencing with the first conveyance. The proportionate share shall be in the same ratio as his percentage of ownership in the common elements set forth in the declaration.

When the state statutes use the word "shall" is to be considered similar to "must" or "will". It does not note that they "may" pay at the discretion of 2/3 of owners agreement.

The Board can hire employees unless your CC&Rs say otherwise, and it sounds like the maintenance tech is an employee. The Board probably voted on a wage for him. The Board must, of course, comply with any laws about taxes, Workers Comp, etc.

How many hour a week does this tech work for your HOA?

We don't currently have any posters from IL, but Janet's citations see on target.