Deferred Assessment Resolutions

Once approved by the Board of Directors, this Deferred Assessment Resolution will strengthen an association’s ability to file under the corporate method (Form 1120), which will often result in reduced income taxes. The filing method will not be determined until later, after the year-end financial results are available. Passing this resolution is considered wise tax planning, and it cannot cause any problems if the corporate method is not ultimately used. Goldklang Group recommends that this resolution be passed on an annual basis prior to the end of the fiscal year.

Here are some samples of our Deferred Assessment Resolution:

Condominium and Homeowner Associations

There are two methods of filing a tax return for condominiums and homeowner associations. They are: (1) elect to file under Internal Revenue Code (IRC) Section 528 and file Internal Revenue Service Form 1120 H, or (2) file as a regular corporation under IRC Section 277 on Form 1120. Both methods are available to the Association on an annual basis. Based on a number of variable factors, we will recommend the filing method which we feel is most beneficial to your Association upon completion of the annual audit.

However, in order for the Association to be in a position to file under the corporate method, if that is the most beneficial method that year, we recommend that a resolution deferring any excess assessments to the next fiscal year be passed. Suggested wording of this resolution is as follows:

The Association elects to apply all or part of the excess assessment income to the following year’s assessments and that such final amount shall be at the Board’s discretion.

Commercial Condominiums

Commercial Condominiums file as regular corporations under IRC Section 277 on Form 1120. In order for commercial condominiums to enhance their position under the corporate method, we recommend that a resolution deferring any excess assessments to the next fiscal year be passed. Suggested wording of this resolution is as follows:

The Commercial Condominium elects to apply all or part of the excess assessment income to the following year’s assessments and that such final amount shall be at the Board’s discretion.

Housing Cooperatives

Housing cooperatives file under IRC Subchapter T using Form 1120-C. This resolution simply means that the Cooperative will plan to use any surplus earned this year during the following year.

Suggested wording for the deferred assessment resolution:

The Cooperative elects to apply all or part of the excess assessment income to the following year’s assessments and that such final amount shall be at the Board’s discretion.

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