EdithB (Florida)
Posts: 2
Posts: 2
Posted:
I am interested in knowing how our Assoc. can apply for this status. Is there a time limit upon filing?
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501(c)3
Started by EdithB • 12 replies • 5880 views
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TracieS (Colorado)
Posts: 460
Posts: 460
Posted:
I'm REALLY new here, so maybe a better answer will be coming.
I just searched the irs.gov website, and they have publications about filing for 501(c)3 status. You might start there.
T
I just searched the irs.gov website, and they have publications about filing for 501(c)3 status. You might start there.
T
CarolF (Florida)
Posts: 435
Posts: 435
Posted:
Edith - I'm just repeating information that has been on this site in the past. I believe that HOAs in FL are considered "not-for-profit" as opposed to "non-profit". The non-profits are things like churches and Boy Scouts, etc. It is the non-profits that can apply for 501(c)3. I think Donna has explained this, and maybe she can jump in with more authority.
MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
The terms "nonprofit" and "not-for-profit" are interchangeable; in other words, they mean the same! Nonprofit does not mean tax exempt. A 501(c) is a tax exempt org and I don't believe it has to be a nonprofit to qualify. IRS Form 1023 is used to make application to the IRS for tax-exempt status under one of the 501(c) designations.
EdithB (Florida)
Posts: 2
Posts: 2
Posted:
I took Tracie's suggestion and went to irs.gov. It appears HOAs are considered under 501(c)4 and need to complete Form 1024. I haven't looked at the form 1024 but since it is a gov form sure it is quite long. Thanks for your input...been very helpful.
RobertG12 (Arizona)
Posts: 160
Posts: 160
Posted:
This is a very tricky topic until the IRS code brought the 528 rule into effect.
If you want your head to spin, look at this discussion. http://www.irs.gov/pub/irs-tege/eotopicr82.pdf
If you want your head to spin, look at this discussion. http://www.irs.gov/pub/irs-tege/eotopicr82.pdf
MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
Edith,
If the board is serious about seeking tax-exempt status, I would recommend consulting with a CPA. He will be familiar with the IRS rulings and should be able to tell you whether your HOA qualifies for an exemption under 501(c)(4) or 501(c)(7). The other alternative is to stay under Title 528 and be subject to a 30% tax on non-exempt function income (primarily interst on savings). If you are a small assn the $100 deduction may cover your income and you won't have a tax liability at all.
BTW, my assn has a 501(c)(3)designation. Don't ask me how they got it; in fact, it's even a mystery to the board members, one of whom is a CPA.
If the board is serious about seeking tax-exempt status, I would recommend consulting with a CPA. He will be familiar with the IRS rulings and should be able to tell you whether your HOA qualifies for an exemption under 501(c)(4) or 501(c)(7). The other alternative is to stay under Title 528 and be subject to a 30% tax on non-exempt function income (primarily interst on savings). If you are a small assn the $100 deduction may cover your income and you won't have a tax liability at all.
BTW, my assn has a 501(c)(3)designation. Don't ask me how they got it; in fact, it's even a mystery to the board members, one of whom is a CPA.
MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
Robert,
Yeah, it's even "tricky" to the IRS as evidenced by all the rulings they feel necessary to adopt.
I believe a good purportion of the assn's that qualify under Title 528 only have interest income to report. If the tax liab. doesn't amount to more than the $100 deduction then they have no tax to pay. So there's no need to qualify as a tax-exempt org under 501(c).
Yeah, it's even "tricky" to the IRS as evidenced by all the rulings they feel necessary to adopt.
I believe a good purportion of the assn's that qualify under Title 528 only have interest income to report. If the tax liab. doesn't amount to more than the $100 deduction then they have no tax to pay. So there's no need to qualify as a tax-exempt org under 501(c).
SusanW1 (Michigan)
Posts: 5,202
Posts: 5,202
Posted:
Mary = you should have an IRS Determiniation Letter on file. It states what your 501 status is. There are over 15 different categories for not for profits. The 501(c)(3) is for a CHARITABLE designation, so how your HOA got one is a mystery. Charties are supported by memberships, contributions and grants and donations are tax deductible for the donor, according to IRS regulations.
Double check your Determination Letter. That just doesn't sound right that you are a "charity"
Double check your Determination Letter. That just doesn't sound right that you are a "charity"
MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
Susan,
My HOA received the IRS designation many years ago. I don't know what the designation was or how they even qualified. The board is aware of this mystery but I'm sure they do not want to rock the boat.
My HOA received the IRS designation many years ago. I don't know what the designation was or how they even qualified. The board is aware of this mystery but I'm sure they do not want to rock the boat.
DonN (Michigan)
Posts: 357
Posts: 357
Posted:
There may be other posts on this subject. I suggest using the Search engine for HOA Talk.
The IRS information is on Social Welfare Organizations. The key provision is that the organization "must operate primarily to further the common good and general welfare of the people of the community". I believe the meaning of community is the community at large, not the community defined the common interest development.
The AICPA Audit and Accounting Guide for Common Interest Realty Associations states in §6.06 (2005 version), “Few CIRAs meet the eligibility requirements of section 501(c). The exemptions of CIRAs should be review[ed] to maintain eligibility for the exempt status.”
It appears that qualifying as a 501(c) organization is the exception rathaer than the rule.
The IRS information is on Social Welfare Organizations. The key provision is that the organization "must operate primarily to further the common good and general welfare of the people of the community". I believe the meaning of community is the community at large, not the community defined the common interest development.
The AICPA Audit and Accounting Guide for Common Interest Realty Associations states in §6.06 (2005 version), “Few CIRAs meet the eligibility requirements of section 501(c). The exemptions of CIRAs should be review[ed] to maintain eligibility for the exempt status.”
It appears that qualifying as a 501(c) organization is the exception rathaer than the rule.
Don Nordeen
Governance of Property Owners Associations
Governance of Property Owners Associations
AnnJ2 (Colorado)
Posts: 120
Posts: 120
Posted:
I only know that the IRS allows for an association to avoid tax on operatingincome over operating expenses by placing a vote before the membership (we do it at the annual meeting) to designate any excess operating income or operating expenses as reserves at the end of the fiscal year. Reserve income is not taxable. Interest on that income is taxable unless you get the designation as exempt. If anyone wants the wording for the motion i can provide it.
MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
Ann,
You are referring to Rev. Ruling 70-604. The procedure described in the ruling only applies if the assn files tax Form 1120. I believe most assn's file tax Form 1120-H, specific to HOAs. When filing tax Form 1120, taxes are based on net income; whereas with tax Form 1120H, taxes are based on non exempt-function income.
You are referring to Rev. Ruling 70-604. The procedure described in the ruling only applies if the assn files tax Form 1120. I believe most assn's file tax Form 1120-H, specific to HOAs. When filing tax Form 1120, taxes are based on net income; whereas with tax Form 1120H, taxes are based on non exempt-function income.
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