QUESTION: Is real estate owned by the association as common area subject to local property taxes.

ANSWER: No, common areas are not separately taxable. Taxes on common property are paid by the membership through their own property taxes. Each member’s property values are increased by the common areas and thus reflect the value attributable to the common areas. Hence, each owner pays property taxes that reflect the value added by the common areas. Double taxation would result if the association also paid real property taxes on the common areas. In planned developments, there is a specific code section that applies: Rev & Tax Code Section 2188.5.

Exceptions. Although associations do not pay property taxes there may be exceptions, such as special district user fees levied by water districts. Boards should use CPAs who specialize in homeowner associations to prepare the association's tax returns.