
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC528]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter F--Exempt Organizations
 
                PART VII--CERTAIN HOMEOWNERS ASSOCIATIONS
 
Sec. 528. Certain homeowners associations


(a) General rule

    A homeowners association (as defined in subsection (c)) shall be 
subject to taxation under this subtitle only to the extent provided in 
this section. A homeowners association shall be considered 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 association taxable 
income (32 percent of such income 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 management association, a residential real estate 
    management association, or a timeshare association if--
            (A) such organization is organized and operated to provide 
        for the acquisition, construction, 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 membership dues, fees, or assessments from--
                (i) owners of residential units in the case of a 
            condominium management association,
                (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, association property in the case of 
            a timeshare association,

            (C) 90 percent or more of the expenditures of the 
        organization for the taxable year are expenditures for the 
        acquisition, construction, management, maintenance, and care of 
        association property and, in the case of a timeshare 
        association, for activities provided to or on behalf of members 
        of the association,
            (D) no part of the net earnings of such organization inures 
        (other than by acquiring, constructing, or providing management, 
        maintenance, and care of association property, and other than by 
        a rebate of excess membership dues, fees, or assessments) to the 
        benefit of any private shareholder or individual, and
            (E) such organization elects (at such time and in such 
        manner as the Secretary by regulations prescribes) to have this 
        section apply for the taxable year.

               (2) Condominium management association

        The term ``condominium management association'' means any 
    organization meeting the requirement of subparagraph (A) of 
    paragraph (1) with respect to a condominium project substantially 
    all of the units of which are used by individuals for residences.

         (3) Residential real estate management association

        The term ``residential real estate management 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 requirement 
    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 members of the 
        organization,
            (C) property within the organization privately held by the 
        members of the organization, 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 defined

                     (1) Taxable income defined

        For purposes of this section, the homeowners association taxable 
    income of any organization 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 production of the gross income 
        (excluding exempt function income), computed with the 
        modifications provided in paragraph (2).

                          (2) Modifications

        For purposes of this subsection--
            (A) there shall be allowed a specific deduction 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 
    assessments 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 association, or
            (C) owners of timeshare rights to use, or timeshare 
        ownership interests in, real property in the case of a timeshare 
        association.

(Added Pub. L. 94-455, title XXI, Sec. 2101(a), Oct. 4, 1976, 90 Stat. 
1897; amended Pub. L. 95-600, title III, Sec. 301(b)(7), title IV, 
Sec. 403(c)(2), title VII, Sec. 701(n)(1), Nov. 6, 1978, 92 Stat. 2821, 
2868, 2907; Pub. L. 96-605, title I, Sec. 105(a), Dec. 28, 1980, 94 
Stat. 3523; Pub. L. 105-34, title IX, Sec. 966(a)-(d), Aug. 5, 1997, 111 
Stat. 894, 895.)


                               Amendments

    1997--Subsec. (b). Pub. L. 105-34, Sec. 966(d), which directed 
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 probable 
intent of Congress.
    Subsec. (c)(1). Pub. L. 105-34, Sec. 966(a)(1)(A), substituted ``, a 
residential real estate management association, or a timeshare 
association'' for ``or a residential real estate management 
association'' in introductory provisions.
    Subsec. (c)(1)(B)(iii). Pub. L. 105-34, Sec. 966(a)(1)(B), added cl. 
(iii).
    Subsec. (c)(1)(C). Pub. L. 105-34, Sec. 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, Sec. 966(a)(2), added par. (4). 
Former par. (4) redesignated (5).
    Subsec. (c)(5). Pub. L. 105-34, Sec. 966(c), inserted concluding 
provisions ``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.''
    Pub. L. 105-34, Sec. 966(a)(2), redesignated par. (4) as (5).
    Subsec. (d)(3)(C). Pub. L. 105-34, Sec. 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 income 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, Sec. 301(b)(7), substituted 
``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 association were a 
corporation and as though the homeowners association taxable income were 
the taxable income referred to in section 11'' and struck out provision 
that for purposes of this subsection, the surtax exemption provided by 
section 11(d) not be allowed.
    Subsec. (b)(2)(B). Pub. L. 95-600, Sec. 403(c)(2), substituted 
provision related to amount being determined according to section 
1201(a) for provision requiring an amount of 30 percent.
    Subsec. (c)(2). Pub. L. 95-600, Sec. 701(n)(1), substituted ``by 
individuals for residences'' for ``as residences''.


                    Effective Date of 1997 Amendment

    Section 966(e) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [amending this section] shall apply to taxable 
years beginning after December 31, 1996.''


                    Effective Date of 1980 Amendment

    Section 105(b) of Pub. L. 96-605 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to taxable years 
beginning after December 31, 1980.''


                    Effective Date of 1978 Amendment

    Amendment by section 301(b)(7) of Pub. L. 95-600 applicable 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.
    Section 403(d)(3) of Pub. L. 95-600 provided that: ``The amendments 
made by paragraphs (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].''
    Section 701(n)(2) of Pub. L. 95-600 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to taxable 
years beginning after December 31, 1973.''


                             Effective Date

    Section 2101(e) of Pub. L. 94-455 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.''

                  Section Referred to in Other Sections

    This section is referred to in section 6012 of this title.
