Re: How to accept donations | <– Date –> <– Thread –> |
From: Raines Cohen (rc3-coho-Lraines.com) | |
Date: Mon, 15 Dec 2008 05:38:03 -0800 (PST) |
On Sun, Dec 14, 2008 at 10:02 AM, Rob Sandelin <floriferous [at] msn.com> wrote: > > ANY income you generate from any source is taxable at 15%. This is simply > how the tax system works. Unless you spin off a 501C3 as an adjunct to your > organization, and this is complex and expensive, any donations made in cash > that get on your books are taxable. When looking at this issue for a California condominium association (HOA) several years ago, the Finance committee came to the following conclusions, based on its reading the law and some professional interpretations of it, for this particular case, based on IRS section 528: - regular applies-to-all homeowner's dues (assessments) are NOT taxed, under CA/Fed law. This can include different fees for different units, so long as they are based on a universal formula approved by the HOA board; this can include differential amounts related to unit size, number of residents. Under the code affecting this HOA, it was required to account for all funds received each year and could not routinely "carry over" an excess year-to-year without declaring its purpose. Note that at least 60% of the association's income must be from dues. - user fees, like guestroom fees (the example given in the legal docs we looked at was a pool club fee), are taxed at a Federal rate of at least 30% BUT all expenses related to maintaining and operating the property (including, say, utilities) can be deducted, so your net rate can be much lower. - "unearned" income, contributions made without any expectation of return/service/obligation, were NOT subject to tax; presumably there are limits on annual gift amounts, as there are for unsolicited contributions to individuals. You may want to talk with your bookkeeper about how to record this properly and legally. 501c3's nonprofit organizations provide a tax deduction to the contributor. The issue being discussed here, taxability for the recipient, is a different ball of wax. Here's the federal tax form for HOA's, form 1120-H: http://www.irs.gov/pub/irs-pdf/f1120h.pdf Page 3 has the key definition: > Exempt function income. Exempt function income consists of membership dues, > fees, or > assessments from (a) owners of condominium housing units [...] Note the "60% gross income test" and "90% expenditure test" hoops to jump through, yet notice that dues income that meets the standards is NOT part of the taxable income calculation. Capital gain and taxable interest is. I learned a bit about the history of homeowner associations as legal entities from wikipedia: http://en.wikipedia.org/wiki/Homeowners'_association (it is particularly helpful to note the "Undemocratic" section and compare the challenges of many HOAs to the solutions cohousing neighborhoods have found in consensus-based participation by all homeowners) Raines Cohen, Cohousing Coach http://www.CohousingCoach.com/ Planning for Sustainable Communities (Berkeley, CA) Moving into our new downtown Berkeley office and planning classes and orientations Offering cohousing community news and events updates via Twitter: Share your news by starting messages with @cohousing Twitter users: FOLLOW COHOUSING or catch up at http://www.twitter.org/cohousing
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How to accept donations Anne Fleck, December 13 2008
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Re: How to accept donations Rob Sandelin, December 14 2008
- Re: How to accept donations Raines Cohen, December 15 2008
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Re: How to accept donations Rob Sandelin, December 14 2008
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Re: How to accept donations Lynn Nadeau, December 13 2008
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Re: How to accept donations Sharon Villines, December 15 2008
- Neighborhood Stabilization Trust Jessie Kome, December 15 2008
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Re: How to accept donations Sharon Villines, December 15 2008
- Re: How to accept donations Mac Thomson, December 14 2008
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