Member Resources

HOA Filing Requirements

Maryland associations are required to file both the Federal tax form 1120 or 1120H AND the MD form 500.

Taxation of Associations

Associations are required to separate their income and expenses into membership transactions, non-membership transactions, and capital transactions.

Membership income is income received by the association from its members in consideration for membership activities. Examples of membership income are assessments; interest on delinquent assessments; fines, fees, or penalties charged to members; and fees charged for services to members. Membership expenses are expenses that are directly attributable to membership activities. Net membership income can be excluded from taxable income.

Non-membership income is defined by exception. It is any income that does not qualify as a capital contribution or membership income. The only type of non-membership income that many associations have is interest earned on investments. Other examples of non-membership income include vending income, parking fees, room rentals, and nonrefundable key fees. A portion of expenses such as tax preparation fees, office expenses, management fees, and fidelity bonds can be allocated against non-membership income.

Capital contributions are excluded from taxable income and therefore, not subject to income tax. Assessments that are designated for a purpose that is capital in nature would qualify as capital contributions. Capital contributions would include assessments contributed to the replacement fund and special assessments intended for capital projects. Capital expenses are not deductible for income taxes.

Associations are taxed on net income from non-membership activities. Taxes are calculated at graduated tax rates of 15% to 35% when filing an 1120 and at 30% after a $100 credit when filing an 1120H.

Franchise/Personal Property Returns

Purpose-To keep the Association's corporate status active to allow them to operate as a corporation in dealing with banks, courts, etc.

All Maryland non-stock corporations are required to file a Personal property return by April 15th. Maryland mails the forms to all active businesses on record at the beginning of the year. The reports must be mailed. You can perform a search, by name, for MD corporations to see the full entity name, date of incorporation and registered agent information.

http://www.dat.state.md.us/