The board is looking for new revenue streams instead of raising
assessments. They want to allow business advertising in the laundry
rooms. I thought that funds could only come from assessments. Wouldn't
advertising revenue cause problems with the association's nonprofit
No, the outside revenue will not cause problems. Instead of being "tax
exempt" like charities, most HOAs are nonprofit mutual benefit
corporations. There are a number of ways that tax exempt entities can
lose their tax exempt status none of which apply to HOAs.
Whether an HOA files its tax returns under Internal Revenue Code (IRC)
§528 (1120H) or as a non-exempt entity operating within the rules of IRC
§277 (1120), there are provisions to deal with non-member user fees and
revenue streams. An HOA may end up paying an income tax on such
non-member income. However, most CPAs familiar with the HOA industry can
minimize this potential tax.
: Associations needing legal assistance can contact us
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