Property Tax on Clubhouse(?)

DavidG45 (Delaware)
Posts: 994

Posted:

Next year will be the first year our association owns the clubhouses. Our board and PM are preparing next year's budget, and they are convinced we have to pay property tax. I have been under the impression that as a non-profit we are exempt from property tax in Delaware, and a brief survey of communities in our town indicates they are all exempt from property tax.

Am I imagining things? Do those of you with clubhouses pay property tax where you are?

AugustinD
Posts: 1,027

Posted:

How did you do the survey?

I would go to the county tax assessor's office and first, look up your own HOA and see if the Declarant was paying property taxes. Repeat for other HOAs in the area.

HOAs often are stuck with paying property taxes.

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By AugustinD on 09/30/2022 1:52 PM
How did you do the survey?

I would go to the county tax assessor's office and first, look up your own HOA and see if the Declarant was paying property taxes. Repeat for other HOAs in the area.

HOAs often are stuck with paying property taxes.

We have a group of HOA’s that meet a couple of times a year to discuss issues. Property taxes was a question posed to the entire group, and they all said they were tax exempt. I did a parcel search on our county web site on two of the clubhouses, and they showed a stus of “Residential Exempt” with no taxes paid since the HOA took over; in one case twenty five years ago.

MaxB4
Posts: 3,513

Posted:

In 14 years, managing over 150+ HOA's, I never had to pay property taxes on a clubhouse.

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By DavidG45 on 09/30/2022 2:09 PM

We have a group of HOA’s that meet a couple of times a year to discuss issues. Property taxes was a question posed to the entire group, and they all said they were tax exempt. I did a parcel search on our county web site on two of the clubhouses, and they showed a stus of “Residential Exempt” with no taxes paid since the HOA took over; in one case twenty five years ago.

I maybe have an answer if you are in Kent County. If you're not in Kent County, and just to get educated on the topic, I suggest going to or calling the county tax assessor and asking about HOAs. You do not have to give the name of your HOA. Rattle off the names of some other HOAs and see if the county staff there can explain why they are tax exempt.

BarbaraT1 (Texas)
Posts: 821

Posted:

I’ve managed several HOAs that pay property tax, but this is Texas and property tax is about the only way local governments have to generate revenue. Association lots are valued very low, usually $1000 if unimproved and maybe up to $6000 if improved (pool or clubhouse) so the payments are minimal.

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By AugustinD on 09/30/2022 2:34 PM

Posted By DavidG45 on 09/30/2022 2:09 PM

We have a group of HOA’s that meet a couple of times a year to discuss issues. Property taxes was a question posed to the entire group, and they all said they were tax exempt. I did a parcel search on our county web site on two of the clubhouses, and they showed a stus of “Residential Exempt” with no taxes paid since the HOA took over; in one case twenty five years ago.

I maybe have an answer if you are in Kent County. If you're not in Kent County, and just to get educated on the topic, I suggest going to or calling the county tax assessor and asking about HOAs. You do not have to give the name of your HOA. Rattle off the names of some other HOAs and see if the county staff there can explain why they are tax exempt.

New Castle County. I will call them next week. I’m surprised (okay, not really) that our PM hasn’t provided a definitive answer with proof.

AugustinD
Posts: 1,027

Posted:

DavidG45, did you see this: https://www.newcastlede.gov/DocumentCenter/View/25010/Exemption-Application-Guide-4-11-18

Note this question:

Is the charitable activity relieving a burden that the government would otherwise have?

I know your HOA (like nearly all HOAs) does not qualify as a charity for IRS purposes. But I wonder if Delaware counties view HOAs as having undertaken just enough infrastructure responsibility to qualify as having relieved a burden on the government.

After all, one of the main purposes of HOAs is to, indeed, reduce the services governments have to provide. City codes typically require HOAs these days, and yes, it's all about forcing volunteers to do xyz so the city does not have to.

Compare to Kent County. From https://www.co.kent.de.us/planning-dept/planning/homeowners-association/.aspx:

"Of most importance to HOAs, there is a general tax exemption available on parkland owned by civic associations."

DouglasK1 (Florida)
Posts: 2,046

Posted:

You should just be able to lookup the parcel online and see what it is appraised for and how much taxes have been previously:
https://www3.newcastlede.gov/parcel/search/

Escaped former treasurer and director of a self managed association.

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By DouglasK1 on 09/30/2022 6:46 PM
You should just be able to lookup the parcel online and see what it is appraised for and how much taxes have been previously:
https://www3.newcastlede.gov/parcel/search/

I know what the de eloped is paying. But he is a for profit corporation. I believe non-profits are tax exempt.

CathyA3 (Ohio)
Posts: 6,299

Posted:

This is a few years old, but it suggests that HOAs do pay property taxes (and that there can be some unpleasant surprises if they fail to do so):

https://www.hoaleader.com/public/Heres-What-Happens-When-Your-HOA-Doesnt-Pay-Its-Taxes.cfm

FWIW, it may make a difference whether you're talking about condos or HOAs. In my condo community, we owners are assessed in part based on our percentage of ownership of the common areas. So it can appear on the tax rolls that the association doesn't pay property taxes (the common area parcels show as no taxes owed or paid), but the taxes are being paid by individual owners.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By DavidG45 on 09/30/2022 7:33 PM

Posted By DouglasK1 on 09/30/2022 6:46 PM
You should just be able to lookup the parcel online and see what it is appraised for and how much taxes have been previously:
https://www3.newcastlede.gov/parcel/search/

I know what the de eloped is paying. But he is a for profit corporation. I believe non-profits are tax exempt.

Just a caution, but you need to specify what kind of tax. You may not pay income tax (with some exceptions), but you will pay sales taxes. I suggest running this by a professional who is knowledgeable about this - my sense is that there is a lot of misinformation floating around.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By CathyA3 on 10/01/2022 10:39 AM

Posted By DavidG45 on 09/30/2022 7:33 PM

Posted By DouglasK1 on 09/30/2022 6:46 PM
You should just be able to lookup the parcel online and see what it is appraised for and how much taxes have been previously:
https://www3.newcastlede.gov/parcel/search/

I know what the de eloped is paying. But he is a for profit corporation. I believe non-profits are tax exempt.

Just a caution, but you need to specify what kind of tax. You may not pay income tax (with some exceptions), but you will pay sales taxes. I suggest running this by a professional who is knowledgeable about this - my sense is that there is a lot of misinformation floating around.

Also, thinking about this some more, if non-profits didn't have to pay property taxes, then it seems like this creates a loop hole. A person can transfer ownership of his home to a non-profit, and bingo! no property taxes. There has to be more to this story.