Saturday, January 23, 2021
Hawai'i Free Press

Current Articles | Archives

Sunday, June 26, 2016
Condominium and Community Associations: File or Else!
By Tom Yamachika @ 5:01 AM :: 3436 Views :: Taxes

Condominium and Community Associations: File or Else!

by Tom Yamachika, President, Tax Foundation Hawaii

Every day we hear about “nonprofit organizations.” But some of us might not know that there are different flavors of nonprofits with vastly different consequences. Our focus will be on homeowners’ and community associations.

But first, a little background is in order. Most of us have heard about “section 501(c)(3) organizations” such as the Tax Foundation of Hawaii or the Aloha United Way. The reference, 501(c)(3), comes from the section of the federal Internal Revenue Code that describes such entities. Contributions to 501(c)(3)’s are generally deductible for income tax purposes. There are also many other kinds of 501(c) organizations such as 501(c)(4) civic leagues like the Jaycees, 501(c)(5) labor unions, and 501(c)(6) trade organizations such as the Chambers of Commerce. Contributions to these kinds of organizations are not tax deductible as charitable contributions, but many people can deduct dues to such organizations legally, as business expenses for example.

There are also some nonprofit organizations that are not in the “501 series” at all. Condominium associations, and community associations for planned communities, are organized under state law as nonprofit corporations, but they are not federally tax-exempt under 501(c) like the previously mentioned organizations.

Now, let’s turn back the clock a little to 2010, the year of the “General Excise Tax Protection Act.” That Act is a very nasty law with two pieces. Section 237-9.3 says that if a taxpayer doesn’t file an annual return within a year after it’s due, the taxpayer will lose all credits, deductions, or lower rates. Section 237-41.5 says that if GET is due from an entity but isn’t paid, the Department of Taxation can go after the personal assets of responsible individuals to collect it.

In 2013, a number of nonprofits got jittery about how this law might affect them. In that year they persuaded the Legislature to carve out tax-exempt nonprofits from the personal liability portion of the act, and to have the Department give those nonprofits 90 days’ notice and an opportunity to clean up their act before the exemptions and deductions disappear. But this relief only applies to certain nonprofits such as charities, hospitals, unions, civic leagues, and chambers of commerce. Homeowners’ or community associations were left on their own.

Now here is the issue. Many homeowners’ or community associations only get income from maintenance fees. This kind of income is exempt from GET. But some lesser informed association managers or boards may think “exempt from tax” means “no need to file a return.” That, unfortunately, could have devastating consequences. If no return is filed and a year passes by, the exemption goes away. No notice needs to be given to the association before the exemption disappears. The result would be that the association is liable for 4% (or perhaps 4.5%) GET on all maintenance fees collected, which in all likelihood amounts to a significant number. This liability could be enforced against “responsible persons” such as management companies and board members. Yes, board members. There is no exception for volunteers.

Are you in a condominium, community association, or a planned unit development? Is your association dutifully filing GET annual returns? If not, remember that there is no statute of limitations for a taxpayer that is supposed to file returns but doesn’t, so if there is a problem it can keep on growing. Someone needs to take remedial action before the thermonuclear bomb hits. And if you happen to be a board member, you may be well within the blast radius so you might want to make sure the matter is dealt with.

---30---

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

ACA Signups Hawaii

ALEC

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Ballotpedia Hawaii

Better Hawaii

Blaisdell Memorial Project

Broken Trust

Build More Hawaiian Homes Working Group

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

Coffee Break

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT