26 U.S.C. § 528 — Certain homeowners associations

Page 1730 TITLE 26—INTERNAL REVENUE CODE § 528 and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title. Pub. L. 98–369, div. A, title VII, § 722(c), July 18, 1984, 98 Stat. 973, provided that the amendment made by that section is effective for taxable years beginning after Dec. 31, 1981. EFFECTIVE DATE OF 1981 AMENDMENT Pub. L. 97–34, title I, § 128(b), Aug. 13, 1981, 95 Stat. 203, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years be- ginning after December 31, 1981.’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by section 301(b)(6) of Pub. L. 95–600 ap- plicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. L. 95–600, set out as a note under section 11 of this title. EFFECTIVE DATE OF 1978 AMENDMENT; ELECTION CAMPAIGN CONTRIBUTIONS; COLLATERAL Pub. L. 95–502, title III, § 302(b), Oct. 21, 1978, 92 Stat. 1703, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(1) The amendment made by subsection (a) [amend- ing this section] shall apply to taxable years beginning after December 31, 1974, except that notwithstanding any other provision of law to the contrary, no amounts held at the date of enactment of this bill [Oct. 21, 1978] by an organization described in section 527(e)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] in escrow, in separate accounts for the payment of Fed- eral taxes, or in any other fund which are proceeds de- scribed in section 527(c)(3)(D) of such Code may be used, directly or indirectly, to make a contribution or ex- penditure (as defined in section 301(e) and (f) of the Federal Election Campaign Act of 1971; 2 U.S.C. 431[(e) and] (f) [now 52 U.S.C. 30101(8) and (9)]) in connection with any election held before January 1, 1979. ‘‘(2) Such amounts as described in (1) above shall not be considered as security or collateral for any loan by any State or national bank or any other person or orga- nization.’’ EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see sec- tion 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. EFFECTIVE DATE Pub. L. 93–625, § 10(e), Jan. 3, 1975, 88 Stat. 2119, pro- vided that: ‘‘The amendments made by subsections (a), (b), (c), and (d) [enacting this section and amending sections 501 and 6012 of this title] shall apply to taxable years beginning after December 31, 1974.’’ NOTIFICATION OF INTERACTION OF REPORTING REQUIREMENTS Pub. L. 107–276, § 4, Nov. 2, 2002, 116 Stat. 1932, pro- vided that: ‘‘(a) IN GENERAL.—The Secretary of the Treasury, in consultation with the Federal Election Commission, shall publicize— ‘‘(1) the effect of the amendments made by this Act [amending this section and sections 6012, 6033, 6104, and 7207 of this title], and ‘‘(2) the interaction of requirements to file a notifi- cation or report under section 527 of the Internal Rev- enue Code of 1986 and reports under the Federal Elec- tion Campaign Act of 1971 [52 U.S.C. 30101 et seq.]. ‘‘(b) INFORMATION.—Information provided under sub- section (a) shall be included in any appropriate form, instruction, notice, or other guidance issued to the public by the Secretary of the Treasury or the Federal Election Commission regarding reporting requirements of political organizations (as defined in section 527 of the Internal Revenue Code of 1986) or reporting require- ments under the Federal Election Campaign Act of 1971 [52 U.S.C. 30101 et seq.].’’ PART VII—CERTAIN HOMEOWNERS ASSOCIATIONS Sec. 528. Certain homeowners associations. Editorial Notes AMENDMENTS 1976—Pub. L. 94–455, title XXI, § 2101(a), Oct. 4, 1976, 90 Stat. 1897, added part heading and analysis for part VII. § 528. Certain homeowners associations (a) General rule A homeowners association (as defined in sub- section (c)) shall be subject to taxation under this subtitle only to the extent provided in this section. A homeowners association shall be con- sidered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes. (b) Tax imposed A tax is hereby imposed for each taxable year on the homeowners association taxable income of every homeowners association. Such tax shall be equal to 30 percent of the homeowners asso- ciation taxable income (32 percent of such in- come in the case of a timeshare association). (c) Homeowners association defined For purposes of this section— (1) Homeowners association The term ‘‘homeowners association’’ means an organization which is a condominium man- agement association, a residential real estate management association, or a timeshare asso- ciation if— (A) such organization is organized and op- erated to provide for the acquisition, con- struction, management, maintenance, and care of association property, (B) 60 percent or more of the gross income of such organization for the taxable year consists solely of amounts received as mem- bership dues, fees, or assessments from— (i) owners of residential units in the case of a condominium management associa- tion, (ii) owners of residences or residential lots in the case of a residential real estate management association, or (iii) owners of timeshare rights to use, or timeshare ownership interests in, associa- tion property in the case of a timeshare as- sociation, (C) 90 percent or more of the expenditures of the organization for the taxable year are expenditures for the acquisition, construc- tion, management, maintenance, and care of association property and, in the case of a timeshare association, for activities pro- vided to or on behalf of members of the asso- ciation, (D) no part of the net earnings of such or- ganization inures (other than by acquiring, constructing, or providing management, Page 1731 TITLE 26—INTERNAL REVENUE CODE § 528 maintenance, and care of association prop- erty, and other than by a rebate of excess membership dues, fees, or assessments) to the benefit of any private shareholder or in- dividual, and (E) such organization elects (at such time and in such manner as the Secretary by reg- ulations prescribes) to have this section apply for the taxable year. (2) Condominium management association The term ‘‘condominium management asso- ciation’’ means any organization meeting the requirement of subparagraph (A) of paragraph (1) with respect to a condominium project sub- stantially all of the units of which are used by individuals for residences. (3) Residential real estate management asso- ciation The term ‘‘residential real estate manage- ment association’’ means any organization meeting the requirements of subparagraph (A) of paragraph (1) with respect to a subdivision, development, or similar area substantially all the lots or buildings of which may only be used by individuals for residences. (4) Timeshare association The term ‘‘timeshare association’’ means any organization (other than a condominium management association) meeting the require- ment of subparagraph (A) of paragraph (1) if any member thereof holds a timeshare right to use, or a timeshare ownership interest in, real property constituting association property. (5) Association property The term ‘‘association property’’ means— (A) property held by the organization, (B) property commonly held by the mem- bers of the organization, (C) property within the organization pri- vately held by the members of the organiza- tion, and (D) property owned by a governmental unit and used for the benefit of residents of such unit. In the case of a timeshare association, such term includes property in which the timeshare association, or members of the association, have rights arising out of recorded easements, covenants, or other recorded instruments to use property related to the timeshare project. (d) Homeowners association taxable income de- fined (1) Taxable income defined For purposes of this section, the home- owners association taxable income of any or- ganization for any taxable year is an amount equal to the excess (if any) of— (A) the gross income for the taxable year (excluding any exempt function income), over (B) the deductions allowed by this chapter which are directly connected with the pro- duction of the gross income (excluding ex- empt function income), computed with the modifications provided in paragraph (2). (2) Modifications For purposes of this subsection— (A) there shall be allowed a specific deduc- tion of $100, (B) no net operating loss deduction shall be allowed under section 172, and (C) no deduction shall be allowed under part VIII of subchapter B (relating to special deductions for corporations). (3) Exempt function income For purposes of this subsection, the term ‘‘exempt function income’’ means any amount received as membership dues, fees, or assess- ments from— (A) owners of condominium housing units in the case of a condominium management association, (B) owners of real property in the case of a residential real estate management asso- ciation, or (C) owners of timeshare rights to use, or timeshare ownership interests in, real prop- erty in the case of a timeshare association. (Added Pub. L. 94–455, title XXI, § 2101(a), Oct. 4, 1976, 90 Stat. 1897; amended Pub. L. 95–600, title III, § 301(b)(7), title IV, § 403(c)(2), title VII, § 701(n)(1), Nov. 6, 1978, 92 Stat. 2821, 2868, 2907; Pub. L. 96–605, title I, § 105(a), Dec. 28, 1980, 94 Stat. 3523; Pub. L. 105–34, title IX, § 966(a)–(d), Aug. 5, 1997, 111 Stat. 894, 895.) Editorial Notes AMENDMENTS 1997—Subsec. (b). Pub. L. 105–34, § 966(d), which di- rected amendment of subsec. (b) by inserting before the period ‘‘(32 percent of such income in the case of a timeshare association)’’, was executed by making the insertion before the period at end to reflect the prob- able intent of Congress. Subsec. (c)(1). Pub. L. 105–34, § 966(a)(1)(A), substituted ‘‘, a residential real estate management association, or a timeshare association’’ for ‘‘or a residential real es- tate management association’’ in introductory provi- sions. Subsec. (c)(1)(B)(iii). Pub. L. 105–34, § 966(a)(1)(B), added cl. (iii). Subsec. (c)(1)(C). Pub. L. 105–34, § 966(a)(1)(C), inserted before comma at end ‘‘and, in the case of a timeshare association, for activities provided to or on behalf of members of the association’’. Subsec. (c)(4). Pub. L. 105–34, § 966(a)(2), added par. (4). Former par. (4) redesignated (5). Subsec. (c)(5). Pub. L. 105–34, § 966(c), inserted con- cluding provisions ‘‘In the case of a timeshare associa- tion, such term includes property in which the timeshare association, or members of the association, have rights arising out of recorded easements, cov- enants, or other recorded instruments to use property related to the timeshare project.’’ Pub. L. 105–34, § 966(a)(2), redesignated par. (4) as (5). Subsec. (d)(3)(C). Pub. L. 105–34, § 966(b), added subpar. (C). 1980—Subsec. (b). Pub. L. 96–605 substituted provision that all income of a homeowners association be taxed at a rate of 30 per cent for provision that all income of a homeowners association be taxed a sum computed by multiplying the homeowners association taxable in- come by the highest rate of tax specified in section 11(b) of this title and struck out provision providing for alternative tax in case of capital gains. 1978—Subsec. (b)(1). Pub. L. 95–600, § 301(b)(7), sub- stituted ‘‘Such tax shall be computed by multiplying the homeowners association taxable income by the highest rate of tax specified in section 11(b)’’ for ‘‘Such tax shall consist of a normal tax and a surtax computed as provided in section 11 as though the homeowners as- Page 1732 TITLE 26—INTERNAL REVENUE CODE § 529 sociation were a corporation and as though the home- owners association taxable income were the taxable in- come referred to in section 11’’ and struck out provi- sion that for purposes of this subsection, the surtax ex- emption provided by section 11(d) not be allowed. Subsec. (b)(2)(B). Pub. L. 95–600, § 403(c)(2), substituted provision related to amount being determined accord- ing to section 1201(a) for provision requiring an amount of 30 percent. Subsec. (c)(2). Pub. L. 95–600, § 701(n)(1), substituted ‘‘by individuals for residences’’ for ‘‘as residences’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title IX, § 966(e), Aug. 5, 1997, 111 Stat. 895, provided that: ‘‘The amendments made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1996.’’ EFFECTIVE DATE OF 1980 AMENDMENT Pub. L. 96–605, title I, § 105(b), Dec. 28, 1980, 94 Stat. 3523, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to tax- able years beginning after December 31, 1980.’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by section 301(b)(7) of Pub. L. 95–600 ap- plicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. L. 95–600, set out as a note under section 11 of this title. Pub. L. 95–600, title IV, § 403(d)(3), Nov. 6, 1978, 92 Stat. 2869, provided that: ‘‘The amendments made by para- graphs (2), (3), and (4) of subsection (c) [amending this section and sections 857 and 904 of this title] shall take effect on the date of the enactment of this Act [Nov. 6, 1978].’’ Pub. L. 95–600, title VII, § 701(n)(2), Nov. 6, 1978, 92 Stat. 2907, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1973.’’ EFFECTIVE DATE Pub. L. 94–455, title XXI, § 2101(e), Oct. 4, 1976, 90 Stat. 1899, provided that: ‘‘Except as provided in subsection (f)(2) [set out as a note under section 216 of this title], the amendments made by this section [enacting this section and amending sections 216 and 6012 of this title] shall apply to taxable years beginning after December 31, 1973.’’ PART VIII—CERTAIN SAVINGS ENTITIES Sec. 529. Qualified tuition programs. 529A. Qualified ABLE programs. 530. Coverdell education savings accounts. Editorial Notes AMENDMENTS 2014—Pub. L. 113–295, div. B, title I, § 102(e)(4), (6), Dec. 19, 2014, 128 Stat. 4062, substituted ‘‘CERTAIN’’ for ‘‘HIGHER EDUCATION’’ in heading and added item 529A. 2004—Pub. L. 108–311, title IV, § 408(b)(2), Oct. 4, 2004, 118 Stat. 1192, amended directory language of Pub. L. 107–22, § 1(a)(6). See 2001 Amendment note below. 2001—Pub. L. 107–22, § 1(a)(6), July 26, 2001, 115 Stat. 196, as amended by Pub. L. 108–311, title IV, § 408(b)(2), Oct. 4, 2004, 118 Stat. 1192, substituted ‘‘Coverdell edu- cation savings accounts’’ for ‘‘Education individual re- tirement accounts’’ in item 530. Pub. L. 107–16, title IV, § 402(a)(4)(E), June 7, 2001, 115 Stat. 61, struck out ‘‘State’’ before ‘‘tuition’’ in item 529. 1997—Pub. L. 105–34, title II, §§ 211(e)(1)(A), 213(e)(3), Aug. 5, 1997, 111 Stat. 812, 817, substituted ‘‘HIGHER EDUCATION SAVINGS ENTITIES’’ for ‘‘QUALIFIED STATE TUITION PROGRAMS’’ in heading and added item 530. § 529. Qualified tuition programs (a) General rule A qualified tuition program shall be exempt from taxation under this subtitle. Notwith- standing the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). (b) Qualified tuition program For purposes of this section— (1) In general The term ‘‘qualified tuition program’’ means a program established and maintained by a State or agency or instrumentality thereof or by 1 or more eligible educational institu- tions— (A) under which a person— (i) may purchase tuition credits or cer- tificates on behalf of a designated bene- ficiary which entitle the beneficiary to the waiver or payment of qualified higher edu- cation expenses of the beneficiary, or (ii) in the case of a program established and maintained by a State or agency or in- strumentality thereof, may make con- tributions to an account which is estab- lished for the purpose of meeting the qualified higher education expenses of the designated beneficiary of the account, and (B) which meets the other requirements of this subsection. Except to the extent provided in regulations, a program established and maintained by 1 or more eligible educational institutions shall not be treated as a qualified tuition program unless such program provides that amounts are held in a qualified trust and such program has received a ruling or determination that such program meets the applicable require- ments for a qualified tuition program. For purposes of the preceding sentence, the term ‘‘qualified trust’’ means a trust which is cre- ated or organized in the United States for the exclusive benefit of designated beneficiaries and with respect to which the requirements of paragraphs (2) and (5) of section 408(a) are met. (2) Cash contributions A program shall not be treated as a qualified tuition program unless it provides that pur- chases or contributions may only be made in cash. (3) Separate accounting A program shall not be treated as a qualified tuition program unless it provides separate ac- counting for each designated beneficiary. (4) Limited investment direction A program shall not be treated as a qualified tuition program unless it provides that any contributor to, or designated beneficiary under, such program may, directly or indi- rectly, direct the investment of any contribu- tions to the program (or any earnings thereon) no more than 2 times in any calendar year.