In Texas, owner associations
("Associations") are usually not-for-profit corporations
Prepared under Chapter 22 of the Texas Business Organizations Code.
For this reason, many associations want to know whether they qualify
certain tax exemptions reserved for non-profit organizations that
Have significance for the life of the club. Texas Tax Law
offers an exemption from sales tax on goods and services
purchased for use by organizations exempted under Section 5.01 (c) (3),
(4), (8), (10) or (19) of the Internal Revenue Code (the
"Code"). This article focuses on the qualifications
required for a bandage to trace 501 (c) (3) or 501 (c) (4)
Naming from the IRS, as well as some helpful guidance from the IRS
Revenue rulings where the IRS provided an officer
Interpretation of the Code in relation to a specific set of
Facts.
Code § 501 (c) (3)
Code §501 (c) (3) provides exemption from Federal
Income tax of an organization that is ONLY organized and operated
FOR COMMON PURPOSES. The Treasury Regulations provide that
Organization is not organized or operated exclusively for one or
more exceptional purposes, unless it serves a public and not one
private interest. The Treasury Regulations provide that the term
"Charitable" is used in Code §501 (c) (3) in its
generally accepted legal sense and includes among other things
the discharge of the government. Reliefs
the government overlaps with welfare and may be the provision of
Services normally provided by a government agency, such as
Services provided at the expense of taxpayers.
Establishing a reduction in government burdens can be challenging
Hurdle to take. Prove that an organization has the
Government burdens require that (i) their activities
Activities that a government entity considers its burdens;
and (ii) the activities actually reduce that government burden.
The organization must demonstrate that it is a government entity
believes the organization is acting on behalf of the government
Names that actually set free state assets –
human, material and fiscal – that would have to be otherwise
Dedicated to the respective activity.
This determination is based on facts and circumstances. A
Activity is a government burden only when there is a goal
Manifestation of a unit of government which they consider the
Activities of the organization become his burden. Such a consideration
can through the interrelationship between the state
Unity and organization. A good working relationship between
a government and an organization is strong evidence that the
Actually reduces the burdens of the organization
Government. 1 examples for different projects
The following are considered non-profit in this category: (i) the fight against
Drug trafficking 2 and (ii) maintaining volunteers
Fire department 3 and police service
Programs. 4th
Even if the activities of an organization carry through the loads
Otherwise, government must meet the requirements of the Code
Section 501 (c) (3). Therefore, an organization must demonstrate that its
Activities serve a public rather than a private interest within the
Importance of Treasury Regulations. This means that one
Organization that claims to lighten the burdens of government must
demonstrate that any private benefit enjoyed by individuals or
Company is irrelevant both qualitatively and quantitatively
its excluded purposes. To be qualitatively incidental, the private
The advantage must be a necessary accompaniment of activities that
benefits the general public. To be quantitatively random that
the private benefit must be insignificant in the context of the overall context
public benefit.
In summary, even if an association proves that (i) its
Activities are activities that an entity considered to be
his burdens; and (ii) the activities actually reduce such
state burden as the association is not primarily
Providing services to, or benefits for, anyone other than a member
of the association it will likely be difficult to prove that
the associations serve a public rather than a private one
Interest.
Code § 501 (c) (4)
Code Section 501 (c) (4) provides the exemption from Federal
Income tax from civic leagues or organizations that are not organized
Profit, but solely to promote social
Welfare. The concept of social welfare implies a service or a program
directed towards the benefit of the community and not towards a private group
of individuals. According to the Treasury Regulations is an organization
operated exclusively to promote social assistance, if
primarily for the promotion of the common good and
general well-being of the individual within a community. According to the Treasury
Regulations, an organization described in Code § 501 (c) (4)
one that operates primarily for the purpose of induction
civic improvements and social improvements.
The IRS has generally found that homeowner associations are in
a closed development does not meet the requirements for an exception
according to Code § 501 (c) (4) due to the fact that the public
is from access to property of the
Association. 5 The fact that there is, however
a security gate does not automatically mean that the property is owned
through the association is not accessible to the public. In most
Cases, the gate restricts access to the general public, however
there are two generally accepted exceptions: (1) if the
the association can prove that it serves the community
by and large, d. H. the association offers advantages for a community
which extends beyond the gates; or (2) if the club is occupied
essentially the same geographic area as a recognized government
legal person.
It should be noted that sales tax rule 80-63 applies in general
that the term “community” is determined on a case-by-case basis
Basis including the analysis of whether the activities of the
Organization have sufficient community-wide benefit that benefits
Social assistance according to Code § 501 (c) (4).
Although an area represented by an association is not considered to be
Community for the purpose of liberation when the
The activities of the association benefit a community, it can still
qualify for an exemption. For example, if the association owns and
maintains common rooms and facilities for the use and enjoyment of
the general public in contrast to areas and institutions whose
Use and enjoyment is limited to members of the association, then
it can meet the need to serve a community. If the
The association represents an area that is not a community, it
generally not qualified for an exemption under Code §
501 (c) (4) when it ceases to use its recreational facilities
its members, d. H. the use and enjoyment of the common areas that are owned
and to be maintained by an association must be available and expanded upon
Members of the community, as opposed to controlled use
or access restricted to members of the
Association.6 organizations that promote the interests
the residents of a particular residential area usually do not
to qualify.
In summary, it can be said that associations are eligible for an exemption as a code
Section 501 (c) (4) social welfare organizations, but such
Organizations often struggle to meet the requirement that
they serve the interests of a community and not just that
Interests of the association members.
Footnotes
1st Rev. rule. 85-2, 1985-1 C. B. 178.
2nd Rev. Rule. 85-1, 1985-1 C.B. 177.
3rd Rev. rule. 74-361, 1974-1 C. B. 130.
4th Rev. rule. 74-246, 1974-2 C. B. 159.
5. Revenue Ruling 74-99, 1974-1 CB 131, as amended by
Tax Regulation 80-63, 1980-1 CB 116; PLR 200706014.
6. Income regulation 80-63, 1980-1 CB 116.
The content of this article is intended to be general
Instructions on the subject. Expert advice should be sought
about your particular circumstances.