Exempt Status

For HOAs to keep their exempt status with California, there are several requirements. Some are annual while others are bi-annual. All of them must be done accurately and timely.

1. 1120H with the IRS, https://www.irs.gov/forms-pubs/about-form-1120-h
2. 199 with the FTB, https://www.ftb.ca.gov/forms/2020/2020-199.pdf
3. Potentially, 100 with the FTB, https://www.ftb.ca.gov/forms/2020/2020-100.pdf
4. Statement of Information with SoS, https://www.sos.ca.gov/business-programs/business-entities/statements

Because of the many requirements thus the potential for many things to go wrong, it is quite easy to have the FTB or SoS suspend or even revoke an HOAs exempt status. There can be severe legal consequences for a HOA to be suspend or revoked: it loses all rights and privileges to operate and is supposed to cease operations; it cannot participate in any litigation matters as either a plaintiff or defendant; it cannot enter into contracts which may include insurance. Consequently, this matter should not be ignored. To regain exempt status, all missing returns and reports must be filed and  payment of all fees and penalties.

https://www.ftb.ca.gov/file/business/types/charities-nonprofits/revoked-entity-list.html is a list of currently suspended HOAs.  Despite our best efforts, there are thousands of them.  From our experience, a majority of them don’t even realize it.

At its creation, there is a process for an HOA to become exempt with FTB which requires the completion of a 3500, https://www.ftb.ca.gov/forms/misc/3500-booklet.html. By statute, it is not necessary for most HOAs to be exempt with IRS.