Are donations taxable income to an HOA

We at Four Seasons in El Dorado Hills CA have a group of avid billiard players who wish to subsidize the HOA to help purchase two new pool tables to replace the old well-worn ones. They wish to donate $10,000 collectively towards the total cost of $20,000, and will release all claims of ownership rights because of the donation. Sounds like a win-win situation.

However our management company has advise us that the $10,000 donation must be treated as taxable income by the Association even though it is to be used to replace aged equipment. The billiard group realizes that they cannot claim their donation as a charitable contribution because our organization does not qualify for such. But it seems like that 10 grand will then be getting taxed twice.

That doesn't make sense. How can this be true?

HOA's are typically "non-profit" but NOT charitable non-profit. It's not like your giving to Cystic Fibrosis. It's more like your donating money to business that doesn't make a profit. It spends what it collects on it's operational expenses.

There are different types of non-profits and the IRS has definitions for each. A few posters here can tell you more about the tax situation and how it breaks down better. Just giving a layman's version of how it works.

So yes that money that they "donate" could be taxed and they would not get a charitable donation status. The HOA's income is based on dues collections and special assessments. Your HOA could have a special assessment done instead to pay for the project.

Easy enough to get around. When the tables are bought have the seller bill two entities. The HOA and the others. The seller will be glad to do it.

Sounds like the one's donating want the tax write-off more than the HOA. They want some kind of benefit by the donation which would be a tax deduction.

Mark is right, Melissa.

I'm with the rest. The group buys the tables and donates them to the HOA.

Then they buy one table and give it to the HOA. The HOA holds a bake sale to buy the other table

We are at this point only talking about one pool table.

You are correct, but in real terms, the IRS is unlikely to wander around asking where pool and picnic tables came from.

James,

As others have said, expecting that your Association files 1120-H with the IRS, since the donation (be it manufactured goods or money) isn't an assessment, it would be considered taxable income.

If the Association desired, they could pass a special assessment on those individuals for "damage" to the tables. If this was done, the money would be considered an assessment and thus, not taxable.

Now, as has been mentioned, the IRS and any CPA looks at the money. Rarely do they actually look at the capital components themselves. Hence, if the tables were to happen to show up and the Association doesn't know where they came from, so be it.