Why would you want to return the money? Are you never going to repair or replace anything? What is the point? It's less than $300per member. Bank it until needed.
I agree with Tiger.
Alternatively, reduce your HOA fees this year. Also ask yourself how and why you became overfunded. If you have a valid reserve study, why did the board believe there was a need to ask owners to pay more than the study required to achieve a reserve fund balance that exceeded the recommended balance?
Wow This is a rarety. Keep the money. Better have it than try to get it from owners when needed.
The IRS has certain requirements for this -- refer to IRS Revenue Ruling 70-604. The ruling require the HOA members to vote on whether the excess income should be returned to the members or apply it against the following year's assessments. However, this ruling can only be applied if the HOA files the tax form 1120; it cannot be used if the HOA files tax for 1120H. The ruling was first published in 1970 to give HOAs some relief from the inequities of HOAs filing tax form 1120, the only tax filing option at the time. When filing tax form 1120 excess revenue (net profit) is taxed, whereas only nonexempt function income is taxed when filing tax form 1120H.
Normally you will have to have the Owners vote on this, we never ask the owners to agree to a "refund". Instead we have a vote, by means of limited proxy, to request the owner to allow for the funds to be rolled over into the next years budget. Then we study our budget carefully to see how we can reduce the payments to our owners and revise the budget accordingly. I strongly agree to never return monies to the owners, simply roll it over. Mary is correct regarding IRS rules, these need to be followed or you'll end up paying taxes on profits, not a good thing if your a not-for-profit association. I think you'd agree, the general consensus here is to keep the funds and consider your future needs.
Our association faced a similar "problem" with monies left over from a special assessment. Our state laws requires a vote from the owners wether to place the money in a reserve for another special assessment that may come up, or divide the money equally among the owners. We voted to divide among owners. I should also tell you the board wanted to put the money in everyday operating expenses. That was a no-no.
First as mentioned often on this forum, there is a difference between HOA and condo. Writer says the question is condo question.
Second, the writer says the excess income is in the Reserve Fund, not operating. Therefore, roll-over does not apply. That is for excess operating income. If the funds are in operating, only the owners can authorize a carry-over to the following year or a per-unit return to current owners. Returns create a discontent if there have been recent sales or the condo has delinquent owners and should be planned carefully, with advise of the CPA.
Retaining the funds in reserves The amount is not significant with the ever changing costs for construction materials. Many reserve calculations have increases in funding which could be offset by the excess this year. If the condo does not have an operational reserve funding category for the operational budget, this would allow the board to establish this - CPAs recommend this to be as high as 10% of the operational budget.
My personal association, 25 yrs old, with very excellent advisors, recently reported that the reserve funds were too low. Then the storms hit and did $$$ damage to trees and the common property. An excess in reserves would be welcomed.
Excess funds in the operating account may be subject to income tax if the ownership does not elect to roll those funds into the reserve account. There are no taxes imposed on your reserve account balance except for the interest income you earn on that balance.
I think the board will encounter possible liability issues if the reserve account is overfunded and the owners have not approved that course of action. It's one thing to assess owners for future repairs as detailed in your reserve study, but another matter to assess the ownership for unforeseen repairs that may or may not occur. If the reserve account is overfunded and an owner sells their unit, they may demand a refund of their portion of the overassessment.
our excess funds come from the operating money we pay in our budget.come april 1 we will have about 17000 as surplus we have very adequate money going into painting, roofs, and paving.our federation has insurance for 109 associations in case of wind damage etc.we also have a general reserve fund of 17000 which can be used for any needs.so come april 1 why can't the unit owners vote and request the board that $10 x 68=6800 be used to lower our 2011 fee with the balance left in for future problems.many of us feel the board is hoarding money. we have many on a very tight budget.it is our money and they should be asking us what to do with surplus we think fla law and irs federal law says we make the decision on what to do with suplus by a vote of our unit owners am i correct
Should a Property Manager's representative inspect unit owner when problems about the unit are reported?
our surplus at the end of march will be about 20000. it has nothing to do the reserves. the board does not decide we do. is that correct. the board voted to give us back $10 at a board meeting with a unanimous vote. they did not ask the membership. out of the blue the treasurer asked the new boardwith 2 new members to take the $10 back which they did. we had no say on either decision.shouldn't we the unit owners be deciding what to do with straight surplus.?
I am curious about laws relating to excess funds from a litigation for building defects. Our association has 25 units and in 1999 each owner paid a $4,000.00 special assessment. Now after all repairs have been completed, the Association has over $75,000 in excess monies from the litigation. Shouldn't these funds be refunded to the owners that paid for the litigation?