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Thread: HOA and Fundraising Washington

  1. #1
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    Default HOA and Fundraising Washington

    Hi, I am hoping someone might be able to help me with knowing the legal aspect on whether or not a HOA is able to fundraise in order to help subsidise funds for a large project?

    Just some background I belong to what I am told is a fairly large HOA we have just over 1300 homes in our community. It is a gated community for the most part (people run the gates all the time so its really in name only). Another benefit is that our community has 4 wells so we are able to provide water to all of the homes/lots. Currently we have our HOA fee, we also have an annual assessement that is for the water as well as every 6 months we recieve a water bill for the usage we used during that time.

    My husband and I purchased this house not knowing that the water system currently in this community does not meet state standards and they are in need of having to replace pipes and other things. This project is looking to be well over $200,000 and they want to replace the roads while they are replacing the pipes because the roads are bad and were not orginally created for high traffic as what we have now. All this makes sense however they are wanting to increase our HOA fees and/or create special assessments in order to pay for all of this work. Again I do understand the money needs to come from some where, however my question is can the community/HOA use fundraising as a way to help pay for this project and possibly complete the project in a more timely manner then a projected 20 year assessment increase which was proposed?

    Where could I find information on something like this in order to show the BOD which seems to resist any type of help except to increase members dues and assessments.

    Any information is great.

    P.S. I chose this section because the HOA is a non-profit organization and I believe it is incorporated as 501(c)3.

  2. #2
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    Exclamation Das ist in der Doktor!

    Phantasm;
    Hi, I am hoping someone might be able to help me with knowing the legal aspect on whether or not a HOA is able to fundraise in order to help subsidise funds for a large project?
    You might want to check with an Attorney on this, but HOA usually tend to operate under the heading of contractual law so I'd break out the agreement y'all signed when you first bought the house and look closely at it.
    If it doesn't say specifically that they can't do something, you can bet that they will try and do it.

    Where could I find information on something like this in order to show the BOD which seems to resist any type of help except to increase members dues and assessments.
    Show or help them do what ?
    Have you ever tried to tell a nest of fleas to stay off a dog ?
    That's not how they work.
    As I mentioned earlier, you should consult with an Attorney but I don't think you're going to like what you hear.
    Good luck.

    ..__________________
    ~ Free advice is like your public defender,
    …you get what you pay for. ~ drr
    Last edited by drruthless; 06-01-2012 at 05:38 PM.

  3. #3
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    I have looked through our bylaws, convents, and rules and regulations and have found nothing that says we can't fundraise. I was more wondering on the legal side of things. As in is there any legal reason why our HOA could not fundraise in order to try and subsidise the cost of repairing and bringing up to state code our water system.

    Here is a bit of background if it helps any --- Our HOA is a private gated community. It is owned and operated by the community. We have some employes that help with mantience and the admistrative office work. Our board is all volunteer ran. All the committees are all volunteered.

    I have found serval fundraisers that I think would be great to help raise some money for the water system. I have used that in the past when I was the vice president of PTO which was also a 501(c)3. I know as for PTO these fundraisers are okay but I am not sure if as an HOA if it would be okay. Most in our community when I ask questions they just repeat the samething and really do not give a reason as to why or why not we can do something. When I asked about fundraising to help pay for this project the response I get is that we are a private community and do not qualify for any government assistant for our roads and water. I understand that but what does that have to do with us fundraising? We are not asking the government for anything.

  4. #4
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    Question Take the Hint...

    OK, I could find no laws for the State of Washington that would prohibit a Home Owners Association from using a fundraiser for raising money,
    IF THEY WANTED TO !!

    So, in there lies your answer.
    It seems painfully clear to me and should be to you as well that,..

    THEY DON"T WANT TO USE A FUNDRAISER TO RAISE THE MONEY FOR THE REPAIRS..

    And I agree with you, I don't see where or how they came up with the government having anything to do with anything.
    ..________________
    ~ The older I get,
    the older old gets.
    Last edited by drruthless; 06-02-2012 at 01:29 AM.

  5. #5
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    I doubt that your homeowners' association is a 501(c)(3) organization. It is probably a 501(c)(4) organization.

    While your homeowners' association may have the power to raise funds under Washington state law and the homeowners' association's articles of incorporation and bylaws, donations to a 501(c)(4) are not tax deductible.

    Furthermore, the income the HOA receives from any fundraising activities will probably be taxable. Under section 528 of the Internal Revenue Code, a HOA must pay taxes on income other than exempt function income. The term "exempt function income" is defined as "any amount received as membership dues, fees, or assessments from ... owners ...."

    Of course, the fact that the donations are not tax deductible by the donor and are taxable to the HOA doesn't mean that you shouldn't consider fundraising activities, but recognize that the receipts from that bake sale or car wash are not going to be as valuable as you might have planned.
    David K. Staub (www.illinoisbusinessattorney.com)
    Forum posts are not legal advice, are for informational and educational purposes only, and are not a substitute for proper consultation with legal counsel.

  6. #6
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    Thank you for that information, I will double check with one of the many committees on the exact incorporation status of the HOA.

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