Cohousing-L Mailing List: Re: Tax on donations/gifts to cohousing?

[Edwin Simmers (edwinsimmers]

A big thanks to Ann Zabaldo and others who have helped us understand the tax 
ramifications of an “Eco Fund” that we would like to create to accept donations 
and to use to support our community’s value of living lightly on the earth.

It turns out that these donations to our condo association would be considered 
to be contributions to capital and not taxable as income. We can use these 
donations for solar panels, heat pumps and other eco-friendly capital 
improvements that we might not otherwise be able to afford.

Of course, please don’t take this as tax advice for your community’s own 
particular situation.

Thanks again.

Edwin Simmers

> On Nov 15, 2021, at 9:08 PM, Ann Zabaldo <zabaldo [at] earthlink.net> wrote:
> 
> Edwin and all —
> 
> In the past six years, Takoma Village has had donations to our Special 
> Projects Fund of over $120K which comes mostly, but not entirely,  from our 
> resale program.  We  do not pay taxes on these donations.  I’ve included 
> statements from both our CPA and management company below.
> 
> I’ve heard communities say they decline donations because they are worried 
> about the tax implications.  But look … the taxes on income will NEVER exceed 
> the donation.  So even if you did have to pay taxes you would still come out 
> w/ a net positive donation.  So pay the tax and take the balance of the 
> donation to fund projects in your community.   What a great level of problem 
> to have!  You have money beyond your operating budget.   If you are really 
> truly worried … call your CPA and ask for a written opinion as below.
> 
> Since donations are outside your operating budget and your reserve funds, you 
> can even invest the donated money in an Exchange Traded Fund (also called an 
> INDEX Fund).  And some of those EFT are also  Environment Social Govenance 
> Funds. (ESG).  Then you can have an income stream beyond your HoA dues. This 
> you WILL LIKELY have to pay taxes on but as I wrote before … the tax will 
> never exceed the income.   Be of good cheer when sending in your tax 
> liability. 
> 
> Here is a link to Vanguard’s ESG fund page:
> 
> https://investor.vanguard.com/investing/esg/ 
> <https://investor.vanguard.com/investing/esg/>
> 
>   Or … is there something else about paying taxes on donations that I’m 
> missing?
> 
> This is information from our management company, Summit Management, and our 
> CPA, Strauss & Associates.
> 
> —BEGIN—
> 
> From Sumitt management company:
> 
>> The issue of taxability hinges upon the source of the “income” to the 
>> cooperative.  Since the funds are received from cooperative members, and not 
>> from a source outside the cooperative, they would be considered as another 
>> form of member assessment or income.
> 
> From our CPA:
> 
>> I agree with the idea that the money is from members so it will not be 
>> taxable.  Membership income shouldn’t be  a taxable event to the 
>> cooperative.  However, even if it was taxable there should be expenses to 
>> offset that specific income so there should be not tax either way.
>> 
>>  
>> Jonathan Strauss, CPA
>> Strauss & Associates, P.A.
>> www.strausscpa.net <http://www.strausscpa.net/>
>>  
> 
> —END—
> 
> Best —
> 
> Ann Zabaldo
> Takoma Village Cohousing
> Washington, DC
> Ex. Dir. & Mbr. Board of Directors
> Mid Atlantic Cohousing
> Principal, Cohousing Collaborative, LLC
> Falls Church, VA
> 202.546.4654
> zabaldo [at] earthlink.net <mailto:zabaldo [at] earthlink.net>
> 
> Good judgment comes from experience.  And experience?  That comes from poor 
> judgment.
> 
> NOTE:  I’m switching back to using zabaldo [at] earthlink.net <mailto:zabaldo 
> [at] earthlink.net>.  Many apologies!
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
>> On Nov 15, 2021, at 8:54 PM, Edwin Simmers <edwinsimmers [at] bellcoho.com 
>> <mailto:edwinsimmers [at] bellcoho.com>> wrote:
>> 
>> Does anyone have experience with the tax consequences of donations/gifts to 
>> your community? Donations for an Eco Fund, a hardship fund,  or even someone 
>> contemplating the donation of their unit to the community after their death?
>> 
>> Bellingham Cohousing is considering an Eco Fund to receive voluntary 
>> donations that could be used to buy solar panels, gas-free upgrades to our 
>> heating systems, electric vehicle chargers, and electric hot water heat 
>> pumps, for example. We’re wondering if the IRS will consider these gifts to 
>> be income to the association or whether, as with gifts to individuals, they 
>> are not subject to federal income tax and do not need to be reported to the 
>> Internal Revenue Service as income.
>> 
>> And we’re also wondering, if the donations are considered income, whether 
>> they can be considered non-taxable “exempt function income.”
>> 
>> We’re having difficulty finding a tax professional who is familiar with 
>> condominiums that file federal tax returns using Form 1120-H and who can 
>> help us with answers to our questions. If you’ve had experience with these 
>> issues or can refer us to someone else who can advise us, please let us know.
>> 
>> Thanks
>> 
>> Edwin Simmers
>> Bellingham Cohousing
>> edwinsimmers [at] bellcoho.com <mailto:edwinsimmers [at] bellcoho.com>
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>