Quorum/Funds Rollover Question

We have an interesting potential situation for our upcoming annual meeting.

We are not having an election this year because the there are no additional candidates for the three spots up for election. Elections and new documents are the big draw to our meetings. This year we don't have either one of those - just a question about rolling over surplus funds.

We have a pretty low quorum requirement (30% of the 820 units) to conduct business at the meeting. If we don't get enough proxies/in person attendence, then no meeting and therefore no voting on the one question.

Here's where it gets a little complicated. We're not sure how that question even got on the notice/proxy. Florida does not require HOAs to get permission to rollover excess funds. We did not ask the question last year. Apparently our management company thought it was a good idea - the treasurer says he doesn't know why it's there either.

The second notice already went out so we can't pull this back. So if we don't get a quorum, do we just let the question drop and rollover the funds (that's the board's recommendation). Or do we have to try and have another meeting and get a quorum? If we do get a quorum and the vote comes out as "no" to rollover, are we required to be bound by the decision even though the statute says it's at the discretion of the board?

Our CC&Rs and bylaws are completely silent on this situation.

If neither the CCRs nor statute require a vote of owners, then the President simply announces this and deletes the agenda item.

The point is, as soon as the Board identifies that it made a mistake about who decides xyz, be transparent and correct it.

Respectfully I think you are overthinking this. There's no harm and no foul here.

We do it all the time, it's called IRS 70-604.

https://www.davis-stirling.com/HOME/E/Excess-Income-Resolution

EXCESS INCOME RESOLUTION

Nonprofit Corporations. Because associations are nonprofit corporations, their budgets should zero-out at the end of each fiscal year. Since income and expenses are projected when annual budgets are adopted, associations are sometimes over budget at the end of the year and sometimes under budget. Any excess income at the end of the fiscal year must either be returned to the membership or applied to the following year's budget as required by Revenue Ruling 70-604 and 75-371, otherwise it will be taxed.

When to Use Resolution. If an association files Tax Form 1120-H, Revenue Ruling 70-604 does not apply and no excess income tax resolution is needed. If Tax Form 1120 is filed, any excess income at the end of the fiscal year (a budget surplus), must be applied to next year's assessments or refunded to the membership. To apply excess funds to next year's budget, members must approve an excess income resolution.

Routine Approval. The decision of what to do with the excess income can be addressed in an "Excess Income Resolution." Because annual meetings precede the close of the fiscal year, associations don't know if they will have excess income or not. Also, they don't know if their tax preparer will file Form 1120 or Form 1120-H. As a result, most associations routinely include a resolution on their agenda for membership approval to make sure they are covered. Since the resolution does not require a vote by secret ballot, the membership can approve it by (i) a voice vote at the annual meeting and record the vote in the minutes of the meeting or (ii) include it on the ballot with the election of directors.

WHEREAS the _________________ Association is a nonprofit mutual benefit corporation; and

WHEREAS the corporation seeks to act in accordance with applicable IRS Revenue Rulings;

RESOLVED, that any surplus funds remaining in the Association's budget at the end of the fiscal year shall be applied to the following year's budget as provided for in IRS Revenue Ruling 70-604.

The above resolution is an example of a formal resolution used by some associations. The resolution can also done without the "WHEREAS" and "RESOLVED" formalities.

Correction: The manager needs to be reminded that he should not do anything WITHOUT board approval, at minimum.

Thanks for the input. I found out subsequently from the treasurer that the question went on the ballot because our attorney told us our auditor would most likely require some kind of vote. I think he really meant the auditor would want a a resoulution like Max suggested, something that formally says we agreed to rollover the funds.

Part of this is my fault - I saw the draft of the second notice and didn't think about the implications of the a vote but no quorum. I should have asked more questions at the time, but was just relieved that we didn't have to send out the ballots because our one candidate for the boare, ex-board member with a thirst for revenge, decided to withdraw at the last minute.

If we don't get a quorum, we can just ignore the vote and pass the resolution.