Question: I sit on the board of a non-profit food bank. I'm also on our HOA board. I mentioned some of the IRS guidelines about the money we make using food bank fund-raisers during our HOA board meeting. One of the board members said we aren't a non-profit. We're a not-for-profit. What's the difference.
Answer: Entities that are established to generate a financial return for the owners or shareholders are clearly for-profit enterprises. This doesn't mean that there aren't some common elements relating to generating revenue that exceeds costs in organizations that were not established with the primary goal of generating a positive financial return.
Your food bank was probably established as a 501(c)(3) corporation so that it can be tax-exempt. This means it must be operated exclusively for exempt purposes set forth in section 501(c)(3) and that none of its earnings may be used to benefit any private shareholder or individual. It also can't be established for political purposes. Organiza-tions described in section 501(c)(3) are sometimes referred to as charitable organizations.
Your homeowners' association, on the other hand, was established as a not-for-profit, probably under Florida Statute 617. This means that you can generate income from activities and sources in addition to your homeowners' fees. Some associations run golf clubs, restaurants and similar businesses.
There are, however, important tax reporting requirements associated with the activities that your HOA may use to generate revenue. Your association's accountant will certainly guide you through the reporting process if not handle the requirements as part of his/her services.
Most, but not all, charitable organizations like food banks qualify for tax-deductible donations. Confirm the 501(c)(3) designation to be absolutely sure. Some organizations, such as churches or other religious groups, are not required to register as IRS tax-exempt charities in order to receive tax-deductible donations. Any charity, including your food, bank should be able to tell you if your donation is tax deduct-ible. You can also find approved charities on the IRS website. Contributions for community parties, golf fees and the like, that are made to your association, are definitely not tax deductible.
If you need further clarification, seek the advice of your association's attorney or accountant.
Attorney Sylvia Heldreth is a certified specialist in real estate law. Her office is located at 1215 Miramar St., in Cape Coral.
This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.