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Subject: Social Committee funding
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Author Messages
DavidG45
(Delaware)

Posts:141


09/30/2021 7:29 AM  
Our Social Committee is fairly new. Their thought was that they would accept donations, charge fees, or perform raffles in order to pay for all of their events - so at they could be completely self-funding. We live in a town that has a large number of HOA communities, and this is how almost all of them pay for their social events.

Our property manager, however, balked at the idea of opening a checking account in which this money could be deposited, and in fact has told us the social committee cannot collect money of any kind because "it is taxable and excludes some people." He said it's better if the HOA simply budgets for the social committee and they draw from that budget line.

Does anyone know if there are tax or filing consequences of the social committee collects money and then spends it on events?
BarbaraT1
(Texas)

Posts:571


09/30/2021 9:33 AM  
Oh boy, this is always a fun topic around here.

Ask an accountant about tax implications but I believe you would need a pretty significant percentage of the budget to come from non-assessment income before you'd have a tax problem.

Some documents specifically include social events as a valid use of assessments, some specifically exclude it, most are vague. Check yours.

Charging for events is a good way to ensure that the ones who want and attend the event are the ones who fund it. If your community is large enough, a local business may want to sponsor in exchange for advertising. Raffles are sometimes regulated by the state so probably steer away from those. There are also lots of low or no cost social event options they can explore.
TimB4
(Virginia)

Posts:17785


09/30/2021 9:39 AM  
If the social committee is part of the HOA - then your MC is correct in that all funds they collect would be taxable.
This creates more work, filing taxes, but I don't feel is a reason not to open an account.

Unknown about the excluding of people reason.


If the social committee is their own entity (and they could be), then they would govern themselves with zero input from the board and would need to file taxes as well.


HenryS6
(Arizona)

Posts:80


10/01/2021 6:38 AM  
As a technical comment, if your community supports social activities as you described and don't need HOA funding, you can create a separate organization independent from the HOA to run the social activities. Then your PM doesn't need to be involved at all.
DavidG45
(Delaware)

Posts:141


10/01/2021 6:44 AM  
Posted By HenryS6 on 10/01/2021 6:38 AM
As a technical comment, if your community supports social activities as you described and don't need HOA funding, you can create a separate organization independent from the HOA to run the social activities. Then your PM doesn't need to be involved at all.




I'm curious about this idea, but I see two potential problems. First, wouldn't this Social organization need to create a legal entity, with all of the paperwork and tax filing related to that? That seems like a major PITB.

Second, currently the Social Committee can reserve our clubhouse, patio area, etc. for events because they are part of the HOA. Would they still be allowed to do that if they are now an independent organization? Or can the Board simply declare that this organization has the right to reserve amenities?
AugustinD


Posts:1695


10/01/2021 7:53 AM  
Posted By DavidG45 on 10/01/2021 6:44 AM
Or can the Board simply declare that this [independent] organization has the right to reserve amenities?

Your governing documents likely have verbiage stating that common area is for the use of owners and their guests.

Keep in mind that the insurance might be a problem if the HOA starts renting its clubhouse et cetera to non-HOA owners.
MichaelS56
(Minnesota)

Posts:279


10/03/2021 3:24 PM  
In our Association, our social committee does not have its own budget nor receive money from the Board. People who come to the events pay their own way or bring what they need.
AnnaJ1
(Maryland)

Posts:79


10/05/2021 9:03 AM  
We have a very small amount ($1,000 out of $167,000) budgeted for community events. The Events Committee solicits the neighborhood for donations when planning an event.
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Forums > Homeowner Association > HOA Discussions > Social Committee funding



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