Master insurance policy - exempt function expense?

Hello all. I'm the treasurer of a townhome HOA in North Carolina. We have a master insurance policy to cover the buildings, fixtures, major appliances, etc. Each homeowner buys a separate policy to cover their possessions, similar to a condo policy. All owners' dues consist of a monthly amount for the master insurance, maintenance dues, and (next year) reserves.

From what I have found online, exempt function expenses include "Insurance premiums for association property and board liability." Does the master insurance policy count as Exempt Function Income and Expense, to satisfy the tests to use the 1120-H federal income tax form?

The HOA has not filed a tax return before, and I want to make extra sure to follow the rules. Thanks!

Typically, exempt function income are considered assessments.

Insurance would typically be paid by assessments.

Have you looked at return from last year to see how it was handled then?

The master insurance seemed like an acceptable exempt function income and expense, but I wanted to run it past the helpful people here on HOATalk as a sanity check. Thanks!

Last year's taxes were not filed. The HOA was under developer control in 2020, and the developer said he tried to file the 990-N electronic postcard, but the IRS system didn't accept the form, and he didn't try again. He thinks we have until May 15 2022 to file (maybe April 15). If I don't figure out the 2020 return, it won't get done, although I'll have to get the developer to file it, since none of the current board was in charge in 2020. Oh what fun.