(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.
(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 or a residential real estate management 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 amount received as membership dues, fees, or assessments from --
(i) owners of residential units in the case of a condominium management association, or
(ii) owners of residences or residential lots in the case of a residential real estate management 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,
(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 requirement of subparagraph (A) of paragraph (1) with respect to a subdivision, development, or similar area substantially all the lots or building of which may only be used by individuals for residences.
(4) 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.
(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 form --
(A) owners of condominium housing units in the case of a condominium management association, or
(B) owners of real property in the case of a residential real estate management association.
531. Imposition of accumulated earnings tax
In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the accumulated taxable income (as defined in section 535) of each corporation described in section 532, an accumulated earnings tax equal to 28 percent of the accumulated taxable income.
532. Corporations subject to accumulated earnings tax
(a) General rule. -- The accumulated earnings tax imposed by section 531 shall apply to every corporation (other than those described in subsection (b)) formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed.
(b) Exceptions. -- The accumulated earnings tax imposed by section 531 shall not apply to --
(1) a personal holding company (as defined in section 542),
(2) a foreign personal holding company (as defined in section 552),
(3) a corporation exempt from tax under subchapter F (section 501 and following), or
(4) a passive foreign investment company (as defined in section 1296).
(c) Application determined without regard to number of shareholders. -- The application of this part to a corporation shall be determined without regard to the number of shareholders of such corporation.
533. Evidence of purpose to avoid income tax
(a) Unreasonable accumulation determinative of purpose. -- For purposes of section 532, the fact that the earnings and profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the income tax with respect to shareholders, unless the coreporation by the preponderance of the evidence shall prove to the contrary.
(b) Holding or investment company. -- The fact that any corporation is a mere holding or investment company shall be prima facie evidence of the purpose to avoid the income tax with respect to shareholders.
534. Burden of proof
(a) General rule. -- In any proceeding before the Tax Court involving a notice of deficiency based in whole or in part on the allegation that all or any part of the earnings and profits have been permitted to accumulate beyond the reasonable needs of the business, the burden of proof with respect to such allegation shall --
(1) if notification has not been sent in accordance with subsection (b), be on the Secretary, or
(2) if the taxpayer has submitted the statement described in subsection (c), be on the Secretary with respect to the grounds set forth in such statement in accordance with the provisions of such subsection.
(b) Notification by Secretary. -- Before mailing the notice of deficiency referred to in subsection (a), the Secretary may send by certified mail or registered mail a notification informing the taxpayer that the proposed notice of deficiency includes an amount with respect to the accumulated earnings tax imposed by section 531.
(c) Statement by taxpayer. -- Within such time (but not less than 30 days) after the mailing of the notification described in subsection (b) as the Secretary may prescribe by regulations, the taxpayer may submit a statement of the grounds (together with facts sufficient to show the basis thereof) on which the taxpayer relies to establish that all or part of the earnings and profits have not been permitted to accumulate beyond the reasonable needs of the business.
(d) Jeopardy assessment. -- If pursuant to section 6861(a) a jeopardy assessment is made before the mailing of the notice of deficiency referred to in subsection (a), for purposes of this section such notice of deficiency shall, to the extent that it informs the taxpayer that such deficiency includes the accumulated earnings tax imposed by section 531, constitute the
(.txt)