Our HOA "Forfeited" 8/17/93

We rececently discovered that our HOA had "lost" our tax exemption status with the great state of Texas. During investigative conversations with our State Comptroller and Secretary of State Offices, we were advised and submitted a recommended document #AP-206 (HOA Tax Exemption Form). We thought that is all we had to do, then submit the SC letter of tax exemption when received on to the Sec. of State and we'd back in their good graces. Well, that's not what happened.

The State Comptroller's Office just responded: "We are unable to grant tax exemption at this time because your HOA was forfeited on 8/17/93 for failure to satisfy franchise tax requirements. You will need to reinstate the corporation before we can proceed". "The Secretary of State will require evidence that franchise tax requirements have been met in order for your corporation to reinstate".

Quick background: Since 1993, we have had many Property Management Company's and many different people on our BOD..who obviously failed miserably to keep our HOA on track. We are a new board with new management (with competence) - and we're cleaning up the mess left behind.

Anyone have any history/expertise dealing with this similar situation...and any recommendations on what to now. Are we in a huge pickle on this and potentially owe 15 years of franchise taxes???

Thanks so much!

5 of us owners recently orchestrated a "mutiny" and took over the HOA + hired a reputable Property Manager. Booted everyone (previous BOD + PM) else to the curb. We acquired and negotiated all new contracts for property services - there are no familiar faces left.

None of us have access to any "history books" - so we are not sure what the other yahoo's did (and obviously didn't do). Not sure (no records) if audits have been performed (although a "must" in our CCR's). We are getting a CPA on deck (but our HOA is busted) - the previous gang put us in debt and left us penniless. If we have to pay these franchise taxes, I can't imagine what our all owner assessment will be.

Obviously we want/need to get this poor HOA back on track...what a shambles!

Linda,

You stated your assn has lost it tax-exempt status from Tx. That must mean you have a Federal tax-exempt status also. If this is, indeed, the case I doubt your assn was liable for payment of a franchise tax. It could be that the periodic report was not filed during the 15-yr period you mention, thus resulting in forfeiture which may have caused you to lose the St. tax-exempt status. I believe a CPA could straighten out this mess for you as he should be well-versed in all the State tax requirements. Another thing you will want to determine is if the Fed. tax returns have been filed each year.

Susan,

Same in AZ but the fee is only $10/yr. But being dissolved isn't really a big deal. The Corp Commission doesn't pay any attention to nonprofits and there is no penalty for filing late or not filing at all as there is for other corps. All they really want is the $10 annually. If this happens all the HOA has to do is contact the Corp Comm., pay the back report fees and they're back in business. This happened to my former HOA - I believe they were "dissolved" for about 3 years.

A good audit-review looks at things like this, and the secretary's minutes, the annual meeting minutes, insurance policies, IRS filings, Annual Reports, and then the financial reports. We also have mandatory water testing forms that have to be filed with the state.