Our association is contemplating some expensive redecorating for the clubhouse. The association’s articles of incorporation state that we were incorporated as a nonprofit organization. As a nonprofi
Although your articles of incorporation created your association as a “nonprofit organization,” this nonprofit status does not address whether your association must file income tax returns or pay sales tax. The Colorado Nonprofit Act (“Act”) governs the creation and operation of nonprofit corporations. Choosing to create a nonprofit corporation under the Act defines the structure and governance of the resulting nonprofit corporation, not its tax status.
To obtain tax-exempt status, an association must apply and qualify as a tax-exempt entity with the United States Internal Revenue Service (IRS) under section 501(c)(4) of the Internal Revenue Code (IRC). As a general rule, the typical condominium or homeowners association does not qualify for tax exempt status.
Unless the association obtains a ruling from the IRS that it meets the requirements for tax-exemption under section 501(c)(4), it must file a federal tax return and pay sales taxes. For more information on whether your association could qualify for tax-exempt status, contact your independent CPA or financial advisor.
