HOA lobbying

My HOA has recently sent a letter to our state legislators, opposing a proposed legislation that would introduce a tax on services, which would likely result in increased HOA dues. However, the legislation also includes a reduction of the general sales tax, which could more than offset the dues increase. The HOA did not collect any data from its members about their spending on goods and services, so it did not present a cost-benefit analysis. Instead, the board followed the recommendation from an association of HOAs and the management company to oppose the legislation. It also told its members to oppose the legislation.

I think the HOA did not make a fully informed decision and most likely misrepresented economic interests of its members (this is a relatively well-off community, where people spend on luxury cars and other big-ticket purchases). Also, I cannot find anything in the HOA charter or bylaws that authorizes such lobbying. Finally, there is a potential issue with maintaining a non-profit status by an HOA that engages in such activities (there is no hard rule of what the IRS considers a "substantial" activity).

Is this HOA action legit? Did the HOA properly represent its members? Does this and other similar actions put its non-profit status at risk?

Craig, I have a similar issue with my HOA and our county in general.

Different specifics but our county has directed significant attention toward engaging HOA's for various proposals regarding land use and other genral proposals. Most if not all have no direct impact on the HOA's themselves. It also creates "HOA governors" who see themselves as the next higher person in the chain of government for all in the HOA. Same with our By Laws and Declaration: no mention of it unless you skip to the last Board duty which says something like "anything not inconsistent with HOA documents or laws."

As to your questions about it being legit etc.... ,my question is, is it proper and appropriate for an HOA to become involved in matters of local or state or federal governance? or anything not HOA specific for that matter?

I think the greatest risk is that HOAs become a "rung in the ladder" of elected governance without all the protections and checks and balances.

My view is that the HOA's addresses "the commons:" the common areas, common goods, services and amenities, covenants and restrictions, association By Laws and association finances. Government employees cannot endorse a political position or candidate or policy in the performance of their duties, I imagine it is an issue for not for profit HOA's as well.

But I'm not a lawyer.

One of the obligations of an "ELECTED" BOD is to protect their association. If you disagree about what they are doing such as lobbying against a Menards, lobbying against a bill, etc. then either unelect them or take their a$$ to court but bytching on this chat will get you nowhere. Lead, fight or follow but do not get in the way.

Our documents prohibit endorsing political candidates of any stripe, but it doesn't address opposing or supporting HOA legislation. Since your documents don't say anything about this either, you may end up With a circular argument - the documents may not say they can't but don't say they can, either.

You might not like the stance the board took, but that's your opinion and some of your neighbors might be perfect fine with what the board did. That said, I think it would be better if the association worked with a lobbying group of some sort to give them a voice. After all, land!ords, realtors and builders do it all the time, so why not HOAs?

This is the part where one could debate the merits of CAI and their political activity on the local or state level - they aren't that active in my state because they don't have the money to hire a lobbyist to advocate full timee, so I don't have an opinion. It may be different in your state.

The only risk I see in your HOA is if the board used HOA money to lobby directly. I think the primary use for assessments is maintaining the property, so this type of expense would be inappropriate in my opinion. It doesn't cost anything to write a letter,but the board should vote on that and explain to homeowners why they took the stance. If homeowners feel otherwise, they can write their own letter, and if they've really pissed, vote those folks out or a resolution that would specifically prohibit political activity.

Interesting, ain't it? People on this board are always talking about what the legislature should do about HOAs, and when builders, landlords and whatnot talk to these guys and gals about what they like to see, sometimes (most times really), homeowners and renters just stand there or no one listens because they don't have enough money. Politics is a tacky business.....

AugustinD: My HOA is registered as a 501(c)(4), as most HOAs (being "social welfare organizations") are. So, it is tax-exempt, but it has to account for lobbying on Schedule C of its annual Form 990 filing.
Although 501(c)(4)'s are not as restricted from lobbying as 501(c)(3)'s, they cannot, for example, publicly (as opposed to only their members) endorse a particular political candidate in an election.

From https://www.irs.gov/charities-non-profits/other-non-profits/social-welfare-organizations:
"a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status. An organization that has lost its section 501(c)(3) status due to substantial attempts to influence legislation may not thereafter qualify as a section 501(c)(4) organization. In addition, a section 501(c)(4) organization that engages in lobbying may be required to either provide notice to its members regarding the percentage of dues paid that are applicable to lobbying activities or pay a proxy tax. For more information, see Lobbying Issues [https://www.irs.gov/pub/irs-tege/eotopicp97.pdf]."

Would you please consider first googling for two minutes every time you have an issue you want to raise here?

You said the board “most likely misrepresented the economic interests of its members”, but didn’t offer proof – do you have any? And have you discussed ANY of this with the board? If so, what was the response?

You may be correct that the members would appreciate a reduction in the general sales tax, so what’s wrong with THEM writing their own letters to their state representatives? Or asking more questions as you’re doing (a good idea, by the way)? It may be they haven’t because they don’t understand all the underlying issues or don’t care about them.

I'm not saying you're right and they're wrong or vice versa, but since some of this is based on YOUR opinion, maybe you should talk to your neighbors and see how much they know – hopefully, they’ll do their own research or at least attend the next board meeting with you to get more information. If the responses indicate the board members didn’t do a lot of thinking on this matter, you can have more discussion about that.

May I add that each and every HOA is separate entities from each other. If they are not, then they may still be under a developer control. Otherwise HOA's are NOT connected. HOA is NOT an "industry" as many may think. They are each separate incorporated entities. So if a HOA has membership that wants to lobby something, then that is their own group.

The HOA board could certainly approach legislators w/ feedback on these issues. The HOA board, under its leadership, only needs to represent the HOA operation as it views it and not need to seek personal opinions of HOA members. Sending a letter of opposition to legislators should certainly not risk any non-profit status. Non-profit organizations often hire lobbyists to represent their interests.

Per the charter, my HOA is a corporation whose assets are owned by its members. So, it does not have a life of its own. When it is communicating with external parties, including legislators, it is representing the views and interests of its members, not some "HOA operation" (whatever that means).
The board is of can-do-no-wrong type and led by political activists who cannot imagine their lives without such actions. Yeah, yeah, if you are not happy with the board, run for it, yada yada (to borrow from AugustinD).

Whatever happened to the days when HOA's just maintained the common areas and send notices to move the unauthorized RV or paint the badly faded house?

I know they still do that George It seems there is a tendency for "mission creep" in some HOA's nowadays. We have board members who want to get involved in everything as an Association. I don't care what they do as individuals. But I like to see my HOA stick to their day job.

Read up on the duty of care of the directors of a corporation (HOA trustees), and in particular: "A director, however, is in a fiduciary relationship to the corporation and therefore serves the interests of the shareholders (homeowners) as a whole." If the HOA has not collected all relevant data and yet, with the board's assent, made a representation on behalf of the members to an external party, then the board is potentially in breach of its fiduciary responsibility.

You simply have a personal opinion that's in disagreement w/ the board's decision to make the HOA's stance on a potential state issue known. Now that your own opinion is known, we all can say "OK, then."

Personally, I would not advise a board to take a position on a political matter on behalf of the association at all and if they absolutely insisted, I would recommend that they consult the membership first.

I've worked for a few boards that took a stance on zoning issues. In one case, it causes a lot of community distress, as the board wrote a letter on behalf of the association in favor of new construction that several residents actually opposed. When those residents spoke at a city council meeting, the council waved this letter and dismissed their concerns. That led to a fun annual meeting.

CAI (the professional organization for HOA managers and attendant industries) has a lobbying arm and they will ask board members to call state representatives regarding legislation they are concerned about. But what is bad legislation for management companies and lawyers isn't necessarily bad for homeowners so take those requests with a grain of salt.

Barbara,

Boards do a lot of things on behalf of their broad constituency that some members of that constituency find objectionable.

I don’t think this is a disqualifying action - it’s what Boards do.

Sorry. No.

The Board was elected to represent the members of the association.

In this situation I believe the Board can represent the constituents without a polling process.

As far as I am concerned, if the governing documents do not require a survey of the members, then the Board should not spend money or time on such a survey.I think this interpretation of what a Declaration, Articles of Incorporation, and Bylaws say is not unreasonable. It's kind of like saying that a federal or state prosecutor represents 'the people.' As in "The People of the State of California vs. Orenthal James Simpson."I think Cathy's real-life examples of when a board should seriously consider taking a "political stance" are excellent. For the Maryland issue that the OP cited, and taking the OP at his word, I do not think a board should be lobbying in any way on this issue. I am picturing, say, the HOA president attending a session of the state legislature and speaking about how the proposed new tax on services would adversely affect her or his (HOA) corporation. Hopefully legislators on the other side of the issue would question the HOA president about the proposed law's other half: Lowering the general sales tax on the HOA's members and all citizens. If my HOA board did what the OP's board is doing, I would vote against them in the next election. Especially if this "association of HOAs" of which the OP spoke was CAI. Especially if any meaningful time and money were spent lobbying.

What an entertaining thread.

Geno - agreed.

I don't want my comments to sound aggressive - I would never lobby for something that had not been at least discussed at a Board meeting - and had been aired. Frankly, anything like this, to me, requires the Board to agree on what was going to occur.

I would have no issue with lobbying when it makes broad sense for our community - i.e. roads, traffic, public safety issues (ex: mosquito control). Never for politics or goofy stuff that would have a political context - like increases in taxes, etc.