Question:
A few years ago the IRS denied exempt status to our HOA because they
claimed we were a gated community.
1. What is the definition of a “gated” community for tax-exempt purposes?
a. Does having a gated entrance prevent a community from being tax exempt?
b. Does that answer change if the community has open access except for than the gate?
– Roger
Answer:
Hi Roger,
A gated community is a community or development enclosed by gates and not typically open to non-residents. However, you should check with the IRS to understand their definition of a gated community.
Keep in mind that it is rare for the IRS to grant tax-exempt status to an HOA. To become a tax-exempt organization, you must typically fall under one of the exempt organization types. An HOA would likely not fall into any one of these categories, except for a social club or social welfare organization. However, to qualify under one of those, there are strict requirements.
For instance, a social welfare organization must be solely operated for the purpose of promoting social welfare. Other requirements can be found here. As for social clubs, you must be organized for pleasure, recreation, and other similar purposes. Other requirements for social clubs can be found here.
Disclaimer: We are not lawyers. The information provided on this website does not constitute legal advice.
