When running an HOA, there’s always a need for more funds. Even the most financially stable HOAs can always find ways to put more funds to good use. So, you may be wondering: Can HOAs accept donations from vendors? What about fundraising? Can an HOA donate to charities?
In this article, we will discuss the implications that fundraising and donation giving or accepting can have for a homeowners’ association.
Whether or not an association can receive donations is usually found in the governing documents for the community. Even when not explicitly stated, the HOA should have the authority as a corporation to receive cash and/or property from someone’s will. Although nonprofit, HOAs are not classified as tax-deductible organizations. Therefore, such donations would be taxable since HOAs are not charitable organizations.
Again, depending on the governing documents for a specific neighborhood, an HOA can generally accept voluntary donations of money and labor from homeowners or vendors. However, one should always be wary when accepting voluntary labor from people who are supposed to be licensed or insured.
You don’t want to end up in a situation where the HOA is liable for a mistake or injury that could or would have been avoided had the HOA gone through the proper channels and paid for labor. Make your insurance agent aware of any voluntary labor going on in the community so that there are no questions about whether or not someone will be covered under the associations policy.
The HOA is able to host fundraisers to raise extra money for community projects. However, it needs to be clearly defined that resident participation is voluntary and will not result in any special treatment for members who do not donate. It also needs to be obviously stated what you are raising funds for, so that you don’t have upset HOA members who donated their money for one thing and are surprised to find that their funds went toward something else.
Before embarking on any sort of fundraising quest, be sure to discuss with your HOA’s legal team to find out if there are legal ramifications that need to be considered before starting. Fundraising, depending on technicalities and small details, could affect the nonprofit status of your association or have tax implications.
Additionally, there are several liability issues that could be involved with fundraisers, such as – are you inviting people from outside of the community? Are you protected against injuries at the event? Are you serving alcohol? Your legal team will know what steps need to be taken to ensure that you are covered, from a legal standpoint, in your fundraising endeavors.
An HOA cannot make charitable donations from assessments. Association assessments collected from owners are to be used only for common expenses of the association, and a charitable donation does not fall in to that category.
The board can, however, solicit voluntary donations from owners and donate that money to charity. When doing so, it is important to be choosy about where you donate the money, and make sure that it is a source that every member of the community supports. You could find yourselves with some angry association members if you donate to a cause they do not support. Even if they didn’t donate any of the funds, they will still be associated with your HOA by virtue of where they live and thereby have grounds to be upset with donations made in the name of the HOA.
In the end, accepting or giving donations as an HOA is certainly not off-limits, but in any circumstance it’s smart to cover your bases. Check with governing documents, legal advisors, and members of the community before making any major decisions for your association.