26 U.S.C. § 528 : US Code - Section 528: Certain homeowners associations

Search 26 U.S.C. § 528 : US Code - Section 528: Certain homeowners associations

    (a) General rule
      A homeowners association (as defined in subsection (c)) shall be
    subject to taxation under this subtitle only to the extent provided
    in this section. A homeowners association shall be considered an
    organization exempt from income taxes for the purpose of any law
    which refers to organizations exempt from income taxes.
    (b) Tax imposed
      A tax is hereby imposed for each taxable year on the homeowners
    association taxable income of every homeowners association. Such
    tax shall be equal to 30 percent of the homeowners association
    taxable income (32 percent of such income in the case of a
    timeshare association).
    (c) Homeowners association defined
      For purposes of this section - 
      (1) Homeowners association
        The term "homeowners association" means an organization which
      is a condominium management association, a residential real
      estate management association, or a timeshare association if - 
          (A) such organization is organized and operated to provide
        for the acquisition, construction, management, maintenance, and
        care of association property,
          (B) 60 percent or more of the gross income of such
        organization for the taxable year consists solely of amounts
        received as membership dues, fees, or assessments from - 
            (i) owners of residential units in the case of a
          condominium management association,
            (ii) owners of residences or residential lots in the case
          of a residential real estate management association, or
            (iii) owners of timeshare rights to use, or timeshare
          ownership interests in, association property in the case of a
          timeshare association,

          (C) 90 percent or more of the expenditures of the
        organization for the taxable year are expenditures for the
        acquisition, construction, management, maintenance, and care of
        association property and, in the case of a timeshare
        association, for activities provided to or on behalf of members
        of the association,
          (D) no part of the net earnings of such organization inures
        (other than by acquiring, constructing, or providing
        management, maintenance, and care of association property, and
        other than by a rebate of excess membership dues, fees, or
        assessments) to the benefit of any private shareholder or
        individual, and
          (E) such organization elects (at such time and in such manner
        as the Secretary by regulations prescribes) to have this
        section apply for the taxable year.
      (2) Condominium management association
        The term "condominium management association" means any
      organization meeting the requirement of subparagraph (A) of
      paragraph (1) with respect to a condominium project substantially
      all of the units of which are used by individuals for residences.
      (3) Residential real estate management association
        The term "residential real estate management association" means
      any organization meeting the requirements of subparagraph (A) of
      paragraph (1) with respect to a subdivision, development, or
      similar area substantially all the lots or buildings of which may
      only be used by individuals for residences.
      (4) Timeshare association
        The term "timeshare association" means any organization (other
      than a condominium management association) meeting the
      requirement of subparagraph (A) of paragraph (1) if any member
      thereof holds a timeshare right to use, or a timeshare ownership
      interest in, real property constituting association property.
      (5) Association property
        The term "association property" means - 
          (A) property held by the organization,
          (B) property commonly held by the members of the
        organization,
          (C) property within the organization privately held by the
        members of the organization, and
          (D) property owned by a governmental unit and used for the
        benefit of residents of such unit.

      In the case of a timeshare association, such term includes
      property in which the timeshare association, or members of the
      association, have rights arising out of recorded easements,
      covenants, or other recorded instruments to use property related
      to the timeshare project.
    (d) Homeowners association taxable income defined
      (1) Taxable income defined
        For purposes of this section, the homeowners association
      taxable income of any organization for any taxable year is an
      amount equal to the excess (if any) of - 
          (A) the gross income for the taxable year (excluding any
        exempt function income), over
          (B) the deductions allowed by this chapter which are directly
        connected with the production of the gross income (excluding
        exempt function income), computed with the modifications
        provided in paragraph (2).
      (2) Modifications
        For purposes of this subsection - 
          (A) there shall be allowed a specific deduction of $100,
          (B) no net operating loss deduction shall be allowed under
        section 172, and
          (C) no deduction shall be allowed under part VIII of
        subchapter B (relating to special deductions for corporations).
      (3) Exempt function income
        For purposes of this subsection, the term "exempt function
      income" means any amount received as membership dues, fees, or
      assessments from - 
          (A) owners of condominium housing units in the case of a
        condominium management association,
          (B) owners of real property in the case of a residential real
        estate management association, or
          (C) owners of timeshare rights to use, or timeshare ownership
        interests in, real property in the case of a timeshare
        association.