Internal Revenue Code:Sec. 528. Certain homeowners associations
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VII - CERTAIN HOMEOWNERS ASSOCIATIONS
Statute
Sec. 528. Certain homeowners associations
(a) General rule
A homeowners association (as defined in subsection (c)) shall be
subject to taxation under this subtitle only to the extent provided
in this section. A homeowners association shall be considered an
organization exempt from income taxes for the purpose of any law
which refers to organizations exempt from income taxes.
(b) Tax imposed
A tax is hereby imposed for each taxable year on the homeowners
association taxable income of every homeowners association. Such
tax shall be equal to 30 percent of the homeowners association
taxable income (32 percent of such income in the case of a
timeshare association).
(c) Homeowners association defined
For purposes of this section -
(1) Homeowners association
The term ''homeowners association'' means an organization which
is a condominium management association, a residential real
estate management association, or a timeshare association if -
(A) such organization is organized and operated to provide
for the acquisition, construction, management, maintenance, and
care of association property,
(B) 60 percent or more of the gross income of such
organization for the taxable year consists solely of amounts
received as membership dues, fees, or assessments from -
(i) owners of residential units in the case of a
condominium management association,
(ii) owners of residences or residential lots in the case
of a residential real estate management association, or
(iii) owners of timeshare rights to use, or timeshare
ownership interests in, association property in the case of a
timeshare association,
(C) 90 percent or more of the expenditures of the
organization for the taxable year are expenditures for the
acquisition, construction, management, maintenance, and care of
association property and, in the case of a timeshare
association, for activities provided to or on behalf of members
of the association,
(D) no part of the net earnings of such organization inures
(other than by acquiring, constructing, or providing
management, maintenance, and care of association property, and
other than by a rebate of excess membership dues, fees, or
assessments) to the benefit of any private shareholder or
individual, and
(E) such organization elects (at such time and in such manner
as the Secretary by regulations prescribes) to have this
section apply for the taxable year.
(2) Condominium management association
The term ''condominium management association'' means any
organization meeting the requirement of subparagraph (A) of
paragraph (1) with respect to a condominium project substantially
all of the units of which are used by individuals for residences.
(3) Residential real estate management association
The term ''residential real estate management association''
means any organization meeting the requirements of subparagraph
(A) of paragraph (1) with respect to a subdivision, development,
or similar area substantially all the lots or buildings of which
may only be used by individuals for residences.
(4) Timeshare association
The term ''timeshare association'' means any organization
(other than a condominium management association) meeting the
requirement of subparagraph (A) of paragraph (1) if any member
thereof holds a timeshare right to use, or a timeshare ownership
interest in, real property constituting association property.
(5) Association property
The term ''association property'' means -
(A) property held by the organization,
(B) property commonly held by the members of the
organization,
(C) property within the organization privately held by the
members of the organization, and
(D) property owned by a governmental unit and used for the
benefit of residents of such unit.
In the case of a timeshare association, such term includes
property in which the timeshare association, or members of the
association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related
to the timeshare project.
(d) Homeowners association taxable income defined
(1) Taxable income defined
For purposes of this section, the homeowners association
taxable income of any organization for any taxable year is an
amount equal to the excess (if any) of -
(A) the gross income for the taxable year (excluding any
exempt function income), over
(B) the deductions allowed by this chapter which are directly
connected with the production of the gross income (excluding
exempt function income), computed with the modifications
provided in paragraph (2).
(2) Modifications
For purposes of this subsection -
(A) there shall be allowed a specific deduction of $100,
(B) no net operating loss deduction shall be allowed under
section 172, and
(C) no deduction shall be allowed under part VIII of
subchapter B (relating to special deductions for corporations).
(3) Exempt function income
For purposes of this subsection, the term ''exempt function
income'' means any amount received as membership dues, fees, or
assessments from -
(A) owners of condominium housing units in the case of a
condominium management association,
(B) owners of real property in the case of a residential real
estate management association, or
(C) owners of timeshare rights to use, or timeshare ownership
interests in, real property in the case of a timeshare
association.
Sources
(Added Pub. L. 94-455, title XXI, Sec. 2101(a), Oct. 4, 1976, 90
Stat. 1897; amended Pub. L. 95-600, title III, Sec. 301(b)(7),
title IV, Sec. 403(c)(2), title VII, Sec. 701(n)(1), Nov. 6, 1978,
92 Stat. 2821, 2868, 2907; Pub. L. 96-605, title I, Sec. 105(a),
Dec. 28, 1980, 94 Stat. 3523; Pub. L. 105-34, title IX, Sec.
966(a)-(d), Aug. 5, 1997, 111 Stat. 894, 895.)
Miscellaneous
AMENDMENTS
1997 - Subsec. (b). Pub. L. 105-34, Sec. 966(d), which directed
amendment of subsec. (b) by inserting before the period ''(32
percent of such income in the case of a timeshare association)'',
was executed by making the insertion before the period at end to
reflect the probable intent of Congress.
Subsec. (c)(1). Pub. L. 105-34, Sec. 966(a)(1)(A), substituted
'', a residential real estate management association, or a
timeshare association'' for ''or a residential real estate
management association'' in introductory provisions.
Subsec. (c)(1)(B)(iii). Pub. L. 105-34, Sec. 966(a)(1)(B), added
cl. (iii).
Subsec. (c)(1)(C). Pub. L. 105-34, Sec. 966(a)(1)(C), inserted
before comma at end ''and, in the case of a timeshare association,
for activities provided to or on behalf of members of the
association''.
Subsec. (c)(4). Pub. L. 105-34, Sec. 966(a)(2), added par. (4).
Former par. (4) redesignated (5).
Subsec. (c)(5). Pub. L. 105-34, Sec. 966(c), inserted concluding
provisions ''In the case of a timeshare association, such term
includes property in which the timeshare association, or members of
the association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related to
the timeshare project.''
Pub. L. 105-34, Sec. 966(a)(2), redesignated par. (4) as (5).
Subsec. (d)(3)(C). Pub. L. 105-34, Sec. 966(b), added subpar.
(C).
1980 - Subsec. (b). Pub. L. 96-605 substituted provision that all
income of a homeowners association be taxed at a rate of 30 per
cent for provision that all income of a homeowners association be
taxed a sum computed by multiplying the homeowners association
taxable income by the highest rate of tax specified in section
11(b) of this title and struck out provision providing for
alternative tax in case of capital gains.
1978 - Subsec. (b)(1). Pub. L. 95-600, Sec. 301(b)(7),
substituted ''Such tax shall be computed by multiplying the
homeowners association taxable income by the highest rate of tax
specified in section 11(b)'' for ''Such tax shall consist of a
normal tax and a surtax computed as provided in section 11 as
though the homeowners association were a corporation and as though
the homeowners association taxable income were the taxable income
referred to in section 11'' and struck out provision that for
purposes of this subsection, the surtax exemption provided by
section 11(d) not be allowed.
Subsec. (b)(2)(B). Pub. L. 95-600, Sec. 403(c)(2), substituted
provision related to amount being determined according to section
1201(a) for provision requiring an amount of 30 percent.
Subsec. (c)(2). Pub. L. 95-600, Sec. 701(n)(1), substituted ''by
individuals for residences'' for ''as residences''.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 966(e) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after December 31, 1996.''
EFFECTIVE DATE OF 1980 AMENDMENT
Section 105(b) of Pub. L. 96-605 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1980.''
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(7) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
Section 403(d)(3) of Pub. L. 95-600 provided that: ''The
amendments made by paragraphs (2), (3), and (4) of subsection (c)
(amending this section and sections 857 and 904 of this title)
shall take effect on the date of the enactment of this Act (Nov. 6,
1978).''
Section 701(n)(2) of Pub. L. 95-600 provided that: ''The
amendment made by paragraph (1) (amending this section) shall apply
to taxable years beginning after December 31, 1973.''
EFFECTIVE DATE
Section 2101(e) of Pub. L. 94-455 provided that: ''Except as
provided in subsection (f)(2) (set out as a note under section 216
of this title), the amendments made by this section (enacting this
section and amending sections 216 and 6012 of this title) shall
apply to taxable years beginning after December 31, 1973.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 6012 of this title.
