Filing 70-604

This is a question you should be asking your association accountant, not folks on the internet. Some (many?) of us aren't accountants or tax experts, nor do we have access to your income/expense statements, reserve studies, or your documents, which I'm sure have a few things to say about the budget.

For folks who don't know what this is - This is Revenue Ruling 70-604, which allows HOAs that have excess member income (assessment and fees) in a specific year to refund that excess income to the members or roll it over to the next year to avoid being taxed on any excess member income. There are a variety of sources that provide more information on the subject (Google can be useful that way), but there's probably more to this than you think. This was passed in 1970, so I don't know if it's somewhere on the IRS website, but you can try this line and do some searching https://www.irs.gov/newsroom/understanding-irs-guidance-a-brief-primer

All of that said, you said your board said the association's income is more than its expenses - that's fine, but how much more? You also said your reserves are low, which can be problematic depending on the extent of common area the association is responsible for, your most recent reserve study, the amount of your assessment and what it covers, if assessments increases (if you have any) have kept up with inflation, if the association's following the reserve study recommendation, and how much you're paying in association master insurance. And those are just a FEW things you may need to take note of.

Personally, I'd take the excess and put it in reserves but you don't seem to know enough about your budget to make an informed decision. Get copies of your current budget, the last five years or so of income/expense reports to see what line items have increased a little or a helluva lot, and the reserve study (if it's older than five years, it's time for an update). Attend the next board meeting and ask the board any questions you have after your review. There may be more depending on the response - and if they begin to mumble, get that deer in the headlights look, hostile or all of the above, you need to ask more questions because the math may not be mathing.

No, what you are voting on does not mean this.

First, HOA owners are not voting on "filing 70-604." They are voting on whether or not "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."

Second, when this resolution passes by a vote of the majority, the resolution gives the HOA's tax preparer the legal flexibility to keep the taxes the HOA pays as low as possible.

All owners should vote for this resolution.0

For more information, see https://www.davis-stirling.com/HOME/E/Excess-Income-Resolution

Our Association adopted a policy resolution vs. voting in order to comply with the ruling.
Our CPA said this was acceptable (but we are not in CA)