HOA & Utilities

[JackieCPA]

I am trying to find some sort of literature or an article or anything that talks specifically about homeowners association and utilities that count towards the 90% expenditure test. 

I have a new HOA client and 37% of their expenditures are for utilities. They have broken down each utility payment (electric, cable, garbage, etc.) 

My biggest concern is the cable, telephone, and internet. If they qualify exempt under the 90% test or not. The HOA is condominiums. 

[TaxCPANY]

I wasn't looking for guidance on utilities in particular when I found the following site, but its several discussions helped clarify my thinking and spurred further research.  Does the HOA have significant non-exempt income to which the allocation of utility expense seems skewed?  I also would argue that cable, telephone & internet serving the management and security staff are exempt; but I suppose there'd be a problem if the condo building contained a sports bar or other high-earning amenity open to non-members or something like that.

Hoping the following helps.  (Scroll to the bottom of the page to find links to half a dozen articles.)  https://hoatax.com/form-1120h-90-expenditure-test/

[JackieCPA]

100% of the HOA's income is from member's dues. They have no other non-exempt income and the cable, telephone, and internet are for all of the members of the HOA. 

[Catherine]

2 hours ago, JackieB said:

100% of the HOA's income is from member's dues. They have no other non-exempt income and the cable, telephone, and internet are for all of the members of the HOA. 

Sounds like you need to see the HOA agreement.  If they are required to provide those utilities to all units equally, sounds to me it's like electricity for common areas, and does make the 90% test.  YMMV.

[JackieCPA]

Thanks Catherine!