Revenue: What’s taxable?

Member:

• owns a unit in the association

Non-member:

• Does not own a home in the association
• External revenue source, e.g. cell tower lease, bank

Federal tax forms for most associations:

1120-H

• Section 528
• >85+% of associations nationwide
• Exempt vs Non-Exempt

1120

• Section 277
• 10+% of associations
• Corporation Return
• Member vs Non-Member

Revenue not typically taxed:

• • Assessments
  • Delinquency interest, late fees, fines, penalties
  • Transfer and move in/out fees (charged to members)

Non-exempt income (1120-H) & membership income (1120)

• • • Filing form 1120-H
    • Non-exempt income results from three sources:
    • Revenue from non-association property (commercial operations and interest income)
    • Revenue from non-members for use of association property (guest fees and other
      amounts from non-members)
    • Amounts charged to association members for specific services (special use charges
      not assessed ratably to all members
    • Fees charged to members excluded from the list above
    • Income examples: Laundry facilities, vending, room rental, rec rental, golf, restaurants
      – from members/owners
    • Expenses?
    • Reduce taxable income by expenses
    • Direct/specific
    • Allocation
      • Accounting
      •  Audit fees
      • Tax preparation fees
      • Insurance
      • Management
      • Utilities
      • Repairs and maintenance
      • Security
      • Janitorial
      • Housekeeping

Non-Exempt (1120-H) & Non-membership (1120)

• • Income derived from non-owners/non-members
  • Taxable
  • Income examples: Laundry facilities, vending, room rental, rec rental, golf, restaurants
    – from non-members/owners
  • Expenses?
    • Reduce taxable income by expenses
    • Direct/specific and allocated

Electrical Vehicle Charging Stations

• Follow the same guidance as non-exempt for 1120-H filers and membership income
  for 1120 filers

RV Storage

• Follow the same guidance as non-exempt for 1120-H filers and membership income
  for 1120 filers
• Treated as exempt for 1120-H if charged annually

RR 70-604

• Utilize when filing 1120
• Annual resolution
• Must be approved by members
• Return excess income to owners
• Carry forward excess income to the next year
• Cannot carry forward more than one year
• Watch accumulation of annual excess income (should not file form 1120)