Coding of tax on Reserve Fund Interest Income

This is a question about where the tax on reserve fund cd interest income should be coded. I believe the tax on reserve interest income should follow the income which is coded to the reserve interest income account. My management company is coding to operating expense. In florida interest income must be coded to reserves because it is earned on the funds for major capital projects & deferred maintenance exceeding $10,000 . To reflect the tax as operating expense results in increasing the association fees for a non operating item.

I'm looking for some sound advice from some experienced individuals regarding the correct coding. I'm wcd ratesell aware that reserve funds cannot be used for operating expenses. As the reserve interest income is built up it can only be used for reserve projects. My position is that the accumulation of reserve interest income must reflect the net of taxation. Then those funds can be allocated to any of the required reserve accounts in the development of the budget. The current uptick in CD rates makes budgeting for taxes significant.

Am I missing something?

The board should adopt a policy on where interest earned should be deposited.

Ours places any earned interest in the Reserves contingency line item (to pay for under estimated repairs, etc.).

Of course, all interest earned is considered taxable under 1120-H

This is discussed on the net quite a bit. This site seems wise: https://www.davis-stirling.com/HOME/T/Taxes-on-Reserve-Interest