Donation

MarkS44 (Washington)
Posts: 16

Posted:

We are in a battle with a neighbor over easement rights. The wealthy neighbor hired an attorney requiring the Corporation (the Board, HOA) to hire an attorney. One community member donated a five figure amount to the Corporation to help the cause. What are the ramifications of this donation? Can the donation be anonymous? Others are wanting to donate as well. Thank you. Mark

ElleN (Idaho)
Posts: 4,420

Posted:

Overall, I think this is great, with some caveats.

-- For tax purposes, the donations are what are called "non-exempt income." The HOA may have to pay some tax on the donations, since the donations are income. If you want more elaboration or some pointers, ask.

-- I think the Board should inform donors that the HOA is not a charitable nonprofit. This means the donors may not deduct their donations on their personal income taxes.

-- Also I think the Board should make clear, with tact, that donors will not receive special treatment; Not. One. Bit. Pursuant to statutes and case law, the donors do not get input on legal strategy. The donors do not get to meet with the HOA attorney, except possibly if the HOA Board invites the attorney to say a town hall meeting.

-- I am not seeing how the donation can be lawfully 100% anonymous. The Board might be in its rights to refuse to disclose names with the exception that a lawful records request likely will require disclosure of names. Do not fight this. It is what it is. Owners have a lawful right to know whether a fellow owner might be buying "favors" from the board.

-- The instant the HOA receives a letter from an attorney representing someone "adverse" (opposed) to something the HOA is doing, I feel the board has a legal/duty obligation to inform the HOA's insurer and turn this over to counsel. Failing to do so may have serious and expensive repercussions down the road.

-- The board does need to get the advice of counsel and its tax preparer concerning donations. There are too many possible mistakes the board could make.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

This is not good for the HOA. They instead use it as a tax deduction for themselves but that is only if it involves their rental property. It does not if their full time residence.

A HOA is not for profit but not a charitable one. So they get no tax write off.

Also if the HOA wins then they can request their legal costs to be paid by other party. Plus the HOA may countersue.

Note suing your HOA is suing yourself and your neighbors. This person is doing damage to themselves and the entire HOA.

Former HOA President

MelissaP1 (Alabama)
Posts: 13,836

Posted:

This is not good for the HOA. They instead use it as a tax deduction for themselves but that is only if it involves their rental property. It does not if their full time residence.

A HOA is not for profit but not a charitable one. So they get no tax write off.

Also if the HOA wins then they can request their legal costs to be paid by other party. Plus the HOA may countersue.

Note suing your HOA is suing yourself and your neighbors. This person is doing damage to themselves and the entire HOA.

Former HOA President

MelissaP1 (Alabama)
Posts: 13,836

Posted:

This is not good for the HOA. They instead use it as a tax deduction for themselves but that is only if it involves their rental property. It does not if their full time residence.

A HOA is not for profit but not a charitable one. So they get no tax write off.

Also if the HOA wins then they can request their legal costs to be paid by other party. Plus the HOA may countersue.

Note suing your HOA is suing yourself and your neighbors. This person is doing damage to themselves and the entire HOA.

Former HOA President

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By MarkS44 on 04/26/2024 10:47 AM
We are in a battle with a neighbor over easement rights. The wealthy neighbor hired an attorney requiring the Corporation (the Board, HOA) to hire an attorney. One community member donated a five figure amount to the Corporation to help the cause. What are the ramifications of this donation? Can the donation be anonymous? Others are wanting to donate as well. Thank you. Mark

What kind of corporation is it? You probably report it as income.

MarkS44 (Washington)
Posts: 16

Posted:

Thank you all for replies. It is a corporation that works to maintain infrastructure and easements. Sort of like an HOA but with far less authority.

CathyA3 (Ohio)
Posts: 6,299

Posted:

If you are hiring an attorney, would this be an appropriate question to ask that person?

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By MarkS44 on 04/26/2024 10:47 AM
We are in a battle with a neighbor over easement rights. The wealthy neighbor hired an attorney requiring the Corporation (the Board, HOA) to hire an attorney. One community member donated a five figure amount to the Corporation to help the cause. What are the ramifications of this donation? Can the donation be anonymous? Others are wanting to donate as well. Thank you. Mark

I would set up a a separate LLC to accept the donations and pay the legal fees. If anyone asks where the funding cs,e from, it was donated by an LLC.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By DeanJ on 04/27/2024 7:19 AM
I would set up a a separate LLC to accept the donations and pay the legal fees. If anyone asks where the funding cs,e from, it was donated by an LLC.

This is not lawful in any way, shape or form.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Are there any state laws governing your type of corporation, and what do they say? Do you default to the state's statutes governing non=profits? Does your corporation have an attorney you work with, or are you hiring someone specifically for this litigation?

Without knowing these things, it's impossible to say how much freedom you have to accept the donations and what kinds of liabilities you take on if you don't abide by donors' rules or properly account for the funds. I suspect this whole business could be a lot less casual than it may appear on the surface.

DeanJ
Posts: 1,786

Posted:

Actually, it is as long as the HOA is not an owner of the LLC.