CAI-NJ Sep.2016

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nization which operates exclusively for the promotion of social welfare if it provides maintenance of common property for the benefit of its mem- bers. Additionally, if the association’s income is used to provide direct ben- efits to its members, members that pay dues for such maintenance, this would indicate that the association is benefit- ting members, and not the community. Any benefit to the community may be incidental. As stated earlier, most associations will not qualify for such exempt sta- tus, but an association may possibly qualify if the public has full access to the association either through direct access like parks, greenways, lakes, bike paths etc. or through user fees such as golf courses and restaurants. Additionally, it is possible that even in a gated community, if for example the gates are merely for security, an Association may qualify. If the association does qualify as an exempt social welfare organization, the association must file Form 990 (Return of Organization Exempt from Income Tax). Form 990 is a complex return and includes significant infor- mation about the association as well as the names of the board members. In addition, there is the possibility that association could also be subject to unrelated business tax. This is an intricate issue and if your association meets the criteria, it may be beneficial to have a discussion about social welfare organizations and the related tax consequences with your tax professional. n

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