QUESTION: The board special assessed the membership 5% to contribute to a political action committee which is currently suing the city to block construction of a nearby city park. What are our options for stopping the board?
ANSWER: In Finley v. Superior Court, a homeowners association used association funds to fight the conversion of the nearby El Toro Marine Base into a commercial airport. Members of the association sued claiming this was a misuse of funds and exceeded the board's authority. The court found that political contributions were not illegal and that boards can take actions they believe are in the best interests of the association, even if members disagree. As a result, unless your governing documents provide otherwise, your board can impose a 5% special assessment to raise funds for a political action committee and related legal expenses. If the membership disagrees with the board's actions, they have recourse--they can recall the board and elect directors who agree with their position.
[NOTE: The full case with the unpublished portions can be seen here: Finley v. Superior Court for the County of Orange.]
Tax-Exempt Corporations. If an association is a 501(c)4 tax-exempt corporation, the board should consult their CPA/tax accountant. Political contributions or forming a PAC could result in a loss of the association's tax exempt status.
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