Since I only immigrated in 1996 I have no clue about taxes before then. I am looking at an letter from the IRS from 1993 to our HOA board stating that since they are non-profit filing form 1120-H they do not have to issue 1099 forms. Was this changed after 1993?
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Apparently yes, as the current form instructions state "You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements." (further details follow in the instructions).
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
I actually believe the opinion in the letter was wrong. Then again with only $10 penalty per form, who cared.Comment
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Something is peculiar here.
A homeowners association is NOT a tax exempt organization.
It is a corporation type entity that has the OPTION of ELECTING on a year-by-year basis to FILE AS IF they were tax exempt - where they have to prove that both the income AND
expenses exceeded a certain percentage of total income and total expenses that were DIRECTLY RELATED to the organization's functions in operating the HOA.
(Offhand I have forgotten the respective % that you need to prove). Any income NOT related, and expenses NOT related, are considered in the formula of taxable income.
It is NOT a Sec. 501(c)(3) entity.
In all other respects the entity is considered a taxable entity and subject to the normal compliance rules.Uncle Sam, CPA, EA. ARA, NTPI FellowComment
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"A homeowners association is NOT a tax exempt organization."
Yours is the first comment in this thread to mention anything about tax-exempt. It's true that the term "non-profit" is somewhat vague (for example, residential rentals or hobbies can be not for profit activities and still generate taxable income in a given year). And I think we all understand the HOAs are not charities. There are in fact different flavors of HOA, one of which is actually considered a 501(c)(4) organization. Otherwise, as you state, the HOA can elect to exempt certain income from tax. (see excerpt below from IRS).
The basic thing we all seem to agree on is that they are subject to 1099 reporting.
"A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development may be exempt as a social welfare organization if it is operated for the benefit of all the residents of the community. [...] A homeowners’ association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally may elect under the provisions of Code section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. "
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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