The IRS is apparently being stingy on granting homeowner associations tax-exempt status as social welfare organizations, finding that many of them are organized or operated to mainly serve private interests of the members.
I only know HOA’s to be self-serving operations, whether it be for businesses or residences. Am not at all familiar with those residential communities who have a homeowner’s association structure to help maintain a clean and cohesive atmosphere in the neighborhood.
But to qualify for tax exemption, a homeowner association must serve the public good over a sufficiently wide area, must have its facilities open for the use and enjoyment of the general public, and cannot perform exterior maintenance activities on private dwellings.
- Many condos, co-ops, and even some neighborhoods have homeowner’s associations (HOAs) made up of member residents.
- HOA members are elected from among the residents and serve to maintain grounds, master insurance, community utilities, as well as the overall finances of the building complex or community.
- Most HOAs will require all unit owners to pay a monthly maintenance charge and may also demand special one-time assessments to cover large community expenses.
- The HOA’s bylaws will spell out which responsibilities are the associations and which are the unit owners’.
Groups that aren’t eligible for tax exemption file Form 1120-H with IRS.