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Subject: IRS 501(c)(4) Exemption
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SF7
(Texas)

Posts:9


03/07/2019 1:59 PM  
I am trying to obtain sales tax exemption in Texas for my HOA. But I need to get the IRS exemption first. I am overwhelmed by the information on the IRS site and need some guidance. Has anyone here gone through the process? Or are there any recommendations for CPAs who have helped with this?

Thank you.
RoyalP
(South Carolina)

Posts:698


03/07/2019 2:25 PM  
To be tax-exempt as a social welfare organization described in Internal Revenue Code (IRC) section 501(c)(4), an organization must not be organized for profit and must be operated exclusively to promote social welfare.

'Most' HOAs are mere executors of a 'maintenance contract' for the commonly owned elements.

? Are y'all SURE y'all qualify ?
BillH10
(Texas)

Posts:359


03/07/2019 3:02 PM  
We went through the process of obtaining a 501(c)(4) exemption for a client association five years ago to satisfy a requirement of the city in which the HOA is located to qualify for a city beautification grant.

I strongly recommend you contact the association CPA and have him or her take care of what needs to be done. ISTR the CPA charged $700, there was also a payment of several hundred dollars made to the IRS. The process took about 3-4 months and was quite involved and time consuming even with the CPA leading the process. We also billed our client for 4-5 hours of consultating time as there were forms to be completed and records to be assembled.

A side benefit is that, once the exemption is obtained, you can apply to the Secretary of State for a waiver of the annual no tax due filing requirement. We normally do the filing for our clients for a small charge, if the CPA does it they often charge $100 or more--eliminating the cost of having the CPA file the no tax due report will eventually offset the expense of obtaining the exemption.
BillH10
(Texas)

Posts:359


03/07/2019 3:07 PM  
Whoops, its not the Secretary of State, its the Comptroller. Also, I just noticed your request for a name. We are in DFW, let me know if you wish a referral to the CPA we use for our clients.
KennethS2
(California)

Posts:23


03/07/2019 4:21 PM  
You will also be exempt from taxes on interest for investments in a Reserve Fund. That is why we did it. We are saving about $60,000 a year as we have over 9 million invested.

Ken
SF7
(Texas)

Posts:9


03/08/2019 7:46 AM  
Posted By BillH10 on 03/07/2019 3:07 PM
Whoops, its not the Secretary of State, its the Comptroller. Also, I just noticed your request for a name. We are in DFW, let me know if you wish a referral to the CPA we use for our clients.




Yes, if you could please share the CPA name/contact info, I would appreciate it.

I already obtained the Franchise tax exemption from TX Comptroller. Looking through their site, it seems many HOA's in TX have received sales tax exemption. I just need to talk to someone who has completed the process recently to see if we qualify, and if so, cost/timeline etc.
CjC


Posts:174


03/08/2019 7:55 AM  
We are a 501(c)(4) as well. It is a process but in the long run, saves us money. On the flip side, we have been researching actually incorporating as a town for a number of years. Hoa fees would mostly be taxes at that point.
SF7
(Texas)

Posts:9


03/08/2019 8:29 AM  
Posted By CjC on 03/08/2019 7:55 AM
We are a 501(c)(4) as well. It is a process but in the long run, saves us money. On the flip side, we have been researching actually incorporating as a town for a number of years. Hoa fees would mostly be taxes at that point.




Did you guys get the exemption recently? Who filed the application? CPA? And do you know which application? Based on my research, I think it needs to be the 1024-A form but not sure...
BillH10
(Texas)

Posts:359


03/11/2019 11:18 AM  
SF, your best bet is to let the CPA run with this. Give him or her what is asked for and step aside. As I mentioned, we took a client through this four years ago, I cannot begin to recall the details of what was involved.

We used Timothy, DeVolt and Company, P.C. in Farmers Branch. (972) 980-4315
TimB4
(Virginia)

Posts:16291


03/11/2019 4:42 PM  
Bill,

Read the posting rules
SueW6
(Michigan)

Posts:489


03/11/2019 7:00 PM  
Michigan no longer issues sales tax exemption letters. (Used to be you showed that when buying goods for the group)

You can show your IRS Determination Letter issued by the IRS when they gave you the 501(c)(4) status.
BillH10
(Texas)

Posts:359


03/12/2019 11:12 AM  
Tim, you are quite right, that was my error. Thanks for the reminder.
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