Re: How to accept donations
From: dlmandel (
Date: Tue, 16 Dec 2008 01:02:16 -0800 (PST)
Neither of the characterizations below is accurate. The following may not be 
precise, because I don't follow small changes, so don't rely on my details, but 
the previous messages had
some serious inaccuracies that begged a response to set straight the
basic principles."Exempt function" income, meaning assessments for the most 
part, is not taxable as long as it makes up most of the HOA's income; IRS sets 
a minimum percentage (60% I think; no energy to look up now). Other, incidental 
income -- and that includes return on investment -- is taxed at a straight 30% 
last time I checked (though it's been awhile) federally, plus whatever your 
state assesses on top of that. 
The only deduction allowed would be expenses incurred in actually garnering the 
income. The fact of spending income does not render it tax-free. (Wouldn't that 
be nice every April 15?)
A "spinoff" 501.c.3 corporation would have to have a totally separate function 
-- charitable, religious or educational. It could not do most of what an HOA 
does, and in any event, the purpose of obtaining such status is to enable 
others' donations to be tax exempt. It has nothing to do with whether income is 
taxable.True donations would not be taxable, though there could be some gray 
area if, for instance, they're really a disguised fee for using your space. Get 
good legal advice.

David Mandel, Sacramento

--- On Mon, 12/15/08, Mac Thomson <mac [at]> wrote:
From: Mac Thomson <mac [at]>
Subject: Re: [C-L]_ How to accept donations
To: cohousing-l [at]
Date: Monday, December 15, 2008, 5:08 AM

On Dec 14, 2008, Rob Sandelin 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.


This would be NET income, right?  So if the donations get spent, there  
would be no net income and no tax.


Mac Thomson

Heartwood Cohousing
Southwest Colorado

"A good traveler has no fixed plans and is not intent on arriving."
        - Lao Tzu

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