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New Regulations for Homeowners' Associations & Other 501(c)(4) Organizations

Homeowners' Associations and other social welfare organization exempt under IRS section 501(c)(4) are subject new regulations.  As part of section 405 of the "Protecting Americans from Tax Hikes Act of 2015", enacted December 18, 2015, certain provisions affect social welfare organizations described in section 501(c)(4) that are established after December 18, 2015 and certain organizations existing on that date.  

A social welfare organization can be a homeowners association, volunteer fire department, civic league, and in some instances, organizations that engage in substantial lobbying activities (as more fully described in IRC Section 501(c)(4)). All organizations operating under section 501(c)(4) must notify the IRS of its intent to operate under such section purusant to the PATH Act, section 405(a) and the new section 506. There are additional changes to the annual information returns required of tax-exempt organizations and penalties for failures to file the information or tax returns.  

The obligations to notify the IRS of the election to operate as a 501(c)(4) entity will commence 60 days after the IRS issuance of the regulations.  This notification process is not a determination by the IRS that the entity providing such notice.  A request for a determination of a 501(c)(4) must be requested separately.

For additional information, please see Notice 2016-09 (Determination of 501c4 status IRS Notice.pdf) issued by the Office of Associate Chief Counsel (Tax Exempt and Government Entities).

L. Sue Loftin is the Founder and Shareholder of The Loftin Firm. For questions relating to this blog or any other California real estate, corporate governance, land use, or estate planning matter, contact Ms. Loftin at (760) 814-9649. 

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