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Form 1120-H U.S.

Income Tax Return


OMB No. 1545-0127

Department of the Treasury


for Homeowners Associations 2000
Internal Revenue Service
For calendar year 2000 or tax year beginning , 2000, and ending , 20
Use Name Employer identification number (see page 4)
IRS
label.
Other- Number, street, and room or suite no. (If a P.O. box, see page 4.) Date association formed
wise,
please
City or town, state, and ZIP code
print or
type.
Check if: (1) Final return (2) Change of address (3) Amended return
A Check type of homeowners association: Condominium management association Residential real estate association Timeshare association
B Total exempt function income. Must meet 60% gross income test (see instructions) B
C Total expenditures made for purposes described in 90% expenditure test (see instructions) C
D Association’s total expenditures for the tax year (see instructions) D
E Tax-exempt interest received or accrued during the tax year E
Gross Income (excluding exempt function income)
1 Dividends 1
2 Taxable interest 2
3 Gross rents 3
4 Gross royalties 4
5 Capital gain net income (attach Schedule D (Form 1120)) 5
6 Net gain (or loss) from Form 4797, Part II, line 18 (attach Form 4797) 6
7 Other income (excluding exempt function income) (attach schedule) 7
8 Gross income (excluding exempt function income). Add lines 1 through 7 8
Deductions (directly connected to the production of gross income, excluding exempt function income)
9 Salaries and wages 9
10 Repairs and maintenance 10
11 Rents 11
12 Taxes and licenses 12
13 Interest 13
14 Depreciation (attach Form 4562) 14
15 Other deductions (attach schedule) 15
16 Total deductions. Add lines 9 through 15 16
17 Taxable income before specific deduction of $100. Subtract line 16 from line 8 17
18 Specific deduction of $100 18 $100 00
Tax and Payments
19 Taxable income. Subtract line 18 from line 17 19
20 Enter 30% of line 19. (Timeshare associations, enter 32% of line 19.) 20
21 Tax credits (see instructions) 21
22 Total tax. Subtract line 21 from line 20. See instructions for recapture of certain credits 22
23 Payments: a 1999 overpayment
credited to 2000 23a
b 2000 estimated tax payments 23b c Total 䊳 23c
d Tax deposited with Form 7004 23d
e Credit for tax paid on undistributed capital gains (attach Form 2439) 23e
f Credit for Federal tax on fuels (attach Form 4136) 23f
g Add lines 23c through 23f 23g
24 Tax due. Subtract line 23g from line 22. See instructions for depository method of tax payment 24
25 Overpayment. Subtract line 22 from line 23g 25
26 Enter amount of line 25 you want: Credited to 2001 estimated tax 䊳 Refunded 䊳 26
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge
and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
Sign
Here
䊳 Signature of officer Date 䊳 Title


Date Preparer’s SSN or PTIN
Paid Preparer’s Check if
signature self-employed
Preparer’s

Firm’s name (or EIN
Use Only yours if self-employed)
Phone no. ( )
address, and ZIP code
For Paperwork Reduction Act Notice, see instructions on page 4. Cat. No. 11477H Form 1120-H (2000)
Form 1120-H (2000) Page 2

A Change To Note 1. A condominium management association property in the case of a timeshare association.
Mailing the return. The association may need to organized and operated to acquire, build, This income must come from the members as
mail its return to a different service center this manage, maintain, and care for the property in a owners, not as customers, of the association’s
year because the IRS has changed the filing condominium project substantially all of whose services.
location for several areas. See Where To File on units are homes for individuals. Assessments or fees for a common activity
page 3. qualify but charges for providing services do not
2. A residential real estate management qualify.
association organized and operated to acquire, Examples. In general, exempt function income
How To Get Forms and build, manage, maintain, and care for a includes assessments made to:
Publications subdivision, development, or similar area
substantially all of whose lots or buildings are 1. Pay principal, interest, and real estate taxes
Personal computer. You can access the IRS on association property.
Web Site 24 hours a day, 7 days a week at homes for individuals.
3. A timeshare association (other than a 2. Maintain association property.
www.irs.gov to:
condominium management association), 3. Clear snow from public areas and remove
● Download forms, instructions, and
organized and operated to acquire, build, trash.
publications.
manage, maintain, and care for the property that Income that is not exempt function income
● See answers to frequently asked tax has members who hold a timeshare right to use, includes:
questions. or a timeshare ownership interest in, real 1. Amounts that are not includible in the
● Search publications on-line by topic or property of the timeshare association. A organization’s gross income other than under
keyword. timeshare asociation cannot be a condominium section 528 (for example, tax-exempt interest).
● Send us comments or request help by e-mail. mangagment association.
2. Payments from nonmembers.
● Sign up to receive local and national tax news Regulations section 1.528-4 explains the
3. Payments from members for special use of
by e-mail. “substantially all” test. In addition:
the organization’s facilities, apart from the use
You can also reach us using file transfer ● At least 60% of the association’s gross generally available to all members.
protocol at ftp.irs.gov. income for the tax year must consist of exempt
4. Interest on amounts in a sinking fund.
function income (see below).
CD-ROM. Order Pub. 1796, Federal Tax 5. Payments for work done on nonassociation
Products on CD-ROM, and get: ● At least 90% of the association’s expenses for
property.
the tax year must consist of expenses to
● Current year forms, instructions, and acquire, build, manage, maintain, or care for its 6. Members’ payments for transportation.
publications. property, and, in the case of a timeshare For more information, see Regulations section
● Prior year forms, instructions, and association, for activities provided to, or on 1.528-9.
publications. behalf of, members of the timeshare association.
● Popular tax forms that may be filled in ● No private shareholder or individual can profit Electing To File Form 1120-H
electronically, printed out for submission, and from the association’s net earnings except by By filing a properly completed Form 1120-H, the
saved for recordkeeping. acquiring, building, managing, or caring for association elects to take advantage of the tax
● The Internal Revenue Bulletin. association property or by a rebate of excess benefits provided by section 528. The election is
membership dues, fees, or assessments. made separately for each tax year and generally
Buy the CD-ROM on the Internet at
www.irs.gov/cdorders from the National ● The association must file Form 1120-H to must be made by the due date, including
Technical Information Service (NTIS) for $21 (no elect under section 528 to be treated as a extensions, of the income tax return. However,
handling fee), or call 1-877-CDFORMS homeowners association. see Regulations section 301.9100-2 for
(1-877-233-6767) toll-free to buy the CD-ROM Association property. Association property information on a 12-month extension of time to
for $21 (plus a $5 handling fee). includes real and personal property that: make the election. This extension does not
1. The association holds, extend the time to pay the tax. Once Form
By phone and in person. You can order forms 1120-H is filed, the association cannot revoke its
and publications 24 hours a day, 7 days a week, 2. The association’s members hold in election for that year unless the Commissioner
by calling 1-800-TAX-FORM (1-800-829-3676). common, consents. The association may request the
You can also get most forms and publications at 3. The association’s members hold privately Commissioner’s consent by filing a ruling request
your local IRS office. within the association, and with the IRS. A user fee must be paid with all
4. Is owned by a governmental unit and is ruling requests. For more information on ruling
General Instructions used to benefit the unit’s residents. requests, see Rev. Proc. 2000-1, 2000-1 I.R.B. 4.
Section references are to the Internal Revenue The timeshare association or its members If the association does not elect to use Form
Code unless otherwise noted. have rights arising out of recorded easements, 1120-H, it must file the applicable income tax
covenants, or other recorded instruments to use return (Form 1120, etc.).
A homeowners association should compare its
property related to the timeshare project. If the association is tax exempt under section
total tax computed on Form 1120-H with its total
tax computed on either Form 1120, U.S. For more information, see Regulations section 501, do not file Form 1120-H. See section 6033
Corporation Income Tax Return, or Form 1.528-3. and related sections. If the association loses its
1120-A, U.S. Corporation Short-Form Income Taxable income. Taxable income is the excess, exempt status, see Regulations section
Tax Return. The association may file the form if any, of: 1.528-8(e).
that results in the lowest tax. 1. Gross income for the tax year, excluding
Note: The taxable income of a homeowners exempt function income, over
When To File
association that files its tax return on Form 2. Allowed deductions directly connected with Generally, an association must file Form 1120-H
1120-H is taxed at a flat rate of 30% for producing any gross income except exempt by the 15th day of the 3rd month after the end
condominium management associations and function income. Allowed deductions include a of the tax year.
residential real estate associations. The tax rate specific $100 deduction. The following are not If the due date falls on a Saturday, Sunday, or
for timeshare associations is 32%. These rates allowed: legal holiday, the association may file on the
apply to both ordinary income and capital gains. ● Net operating loss deduction (section 172). next business day.
● Deductions under Part VIII of subchapter B Private delivery services. You can use certain
Purpose of Form (special deductions for corporations). private delivery services designated by the IRS
A homeowners association files Form 1120-H as to meet the “timely mailing as timely
If facilities are used (or personnel are
its income tax return to take advantage of filing/paying” rule for tax returns and payments.
employed) for both exempt and nonexempt
certain tax benefits. These benefits, in effect, See the instructions for Form 1120 for details.
purposes, see Regulations section 1.528-10.
allow the association to exclude exempt function Extension. File Form 7004, Application for
income (defined below) from its gross income. Exempt function income. Exempt function
Automatic Extension of Time To File Corporation
income consists of membership dues, fees, or
Income Tax Return, to request a 6-month
assessments from (1) owners of condominium
Definitions housing units, (2) owners of real property in the
extension of time to file.
Homeowners association. There are three case of a residential real estate management
kinds of homeowners associations: association, or (3) owners of timeshare rights to
use, or timeshare ownership interests in, real
Form 1120-H (2000) Page 3

Who Must Sign Other Forms and Statements That (3) economic performance takes place with
respect to the expense. There are exceptions for
The return must be signed and dated by the May Be Required recurring items. See section 461(h) and the
president, vice-president, treasurer, assistant The association may have to file any of the related regulations for the rules for determining
treasurer, chief accounting officer, or any other following: when economic performance takes place.
association officer (such as a tax officer)
Form W-2, Wage and Tax Statement. Generally, the association must get IRS
authorized to sign. Receivers, trustees, or
assignees must sign and date any return filed on Form W-3, Transmittal of Wage and Tax consent to change the method of accounting
behalf of an association. Statements. used to report taxable income (for income as a
Form 940 or Form 940-EZ, Employer’s Annual whole or any material item). To do so, it must file
If an association officer completes Form Form 3115, Application for Change in
1120-H, the Paid Preparer’s space should Federal Unemployment (FUTA) Tax Return.
Report annual Federal unemployment (FUTA) tax. Accounting Method. For more information, get
remain blank. Anyone who prepares Form Pub. 538, Accounting Periods and Methods.
1120-H but does not charge the association The tax applies if either of the following
should not sign the return. Generally, anyone requirements are met:
Change in Tax Year
who is paid to prepare the return must sign it ● You paid wages of $1,500 or more in any
and fill in the Paid Preparer’s Use Only area. calendar quarter in 1999 or 2000, or Generally, an association must get the consent
of the IRS before changing its tax year by filing
The paid preparer must complete the ● You had at least one employee who worked Form 1128, Application To Adopt, Change, or
required preparer information and— for the association for some part of a day in any Retain a Tax Year. However, under certain
● Sign the return, by hand, in the space 20 or more different weeks in 1999 or 20 or conditions, an association may change its tax
provided for the preparer’s signature (signature more different weeks in 2000. year without getting the consent. See
stamps and labels are not acceptable). Form 941, Employer’s Quarterly Federal Tax Regulations section 1.442-1 and Pub. 538.
● Give a copy of the return to the taxpayer. Return. File this form quarterly to report payroll
income tax withheld and employer and employee Rounding Off to Whole Dollars
Where To File social security and Medicare taxes. The association may show amounts on the
File your return at the applicable IRS address Form 945, Annual Return of Withheld Federal return and accompanying schedules as whole
listed below: Income Tax. File to report income tax withheld dollars. To do so, drop amounts less than 50
from nonpayroll distributions or payments. cents and increase amounts from 50 cents
If the association’s Use the following
principal office is Internal Revenue Form 1098, Mortgage Interest Statement. Use through 99 cents to the next higher dollar.
located in Service Center address this form to report the receipt of $600 or more of
䊲 䊲 mortgage interest (including points) in the course Depository Method of Tax Payment
of the association’s trade or business. The association must pay the tax due in full no
Florida, Georgia Atlanta, GA 39901 Forms 1099-A, B, DIV, INT, MISC, and S. Use later than the 15th day of the 3rd month after
Kansas, New Mexico, these information returns to report the end of the tax year. The two methods of
Austin, TX 73301
Oklahoma abandonments, acquisitions through foreclosure, depositing association income taxes are
Delaware, District of proceeds from broker and barter exchange discussed below.
Columbia, Indiana, transactions, certain dividends and distributions,
Kentucky, Maryland, interest income, miscellaneous income (e.g., Electronic Deposit Requirement
Michigan, New Jersey, payments to providers of health and medical The association must make electronic deposits
Cincinnati, OH 45999
North Carolina, Ohio, services; proceeds paid to attorneys;
Pennsylvania, South of all depository taxes (such as employment tax,
miscellaneous income payments and excise tax, and corporate income tax) using the
Carolina, West Virginia,
Wisconsin nonemployee compensation), and proceeds from Electronic Federal Tax Payment System (EFTPS)
real estate transactions. Also use these returns in 2001 if:
New York (New York City to report amounts that were received as a
and counties of Nassau, ● The total deposits of such taxes in 1999 were
Rockland, Suffolk, and
Holtsville, NY 00501 nominee on behalf of another person. more than $200,000 or
Westchester) For more information, see the instructions for ● The association was required to use EFTPS in
New York (all other Forms 1099, 1098, 5498, and W-2G. 2000.
counties), Connecticut, Form 8300, Report of Cash Payments Over If the association is required to use EFTPS
Maine, Massachusetts, Andover, MA 05501 $10,000 Received in a Trade or Business. Use
New Hampshire, Rhode and fails to do so, it may be subject to a 10%
this form to report the receipt of more than penalty. If the association is not required to use
Island, Vermont $10,000 in cash or foreign currency in one EFTPS, it may participate voluntarily. To enroll in
Illinois Kansas City, MO 64999 transaction or in a series of related transactions. or get more information about EFTPS, call
Alabama, Tennessee Memphis, TN 37501 Assembling the return. Attach Form 4136, 1-800-555-4477 or 1-800-945-8400.
Alaska, Arizona, Arkansas, Credit for Federal Tax Paid on Fuels, to Form Depositing on time. For deposits made by
California (counties of Alpine, 1120-H. Attach schedules in alphabetical order EFTPS to be on time, the association must
Amador, Butte, Calaveras, and other forms in numerical order after Form initiate the transaction at least 1 business day
Colusa, Contra Costa, Del 4136. before the date the deposit is due.
Norte, El Dorado, Glenn, Complete every applicable entry space on
Humboldt, Lake, Lassen, Marin, Deposits With Form 8109. If the association
Mendocino, Modoc, Napa, Form 1120-H. Do not write “See attached” does not use EFTPS, deposit association income
Nevada, Placer, Plumas, instead of completing the entry spaces. If you tax payments (and estimated tax payments) with
Ogden, UT 84201 need more space on the forms or schedules,
Sacramento, Form 8109, Federal Tax Deposit Coupon. If you
San Joaquin, Shasta, Sierra, attach separate sheets. Use the same size and do not have a preprinted Form 8109, use Form
Siskiyou, Solano, Sonoma, format as on the printed forms. But show the
Sutter, Tehama, Trinity, Yolo, 8109-B to make deposits. You can get this form
totals on the printed forms. Attach these only by calling 1-800-829-1040. Be sure to have
and Yuba), Colorado, Hawaii, separate sheets after all the schedules and
Idaho, Iowa, Louisiana, your employer identification number (EIN) ready
Minnesota, Mississippi,
forms. Be sure to put the association’s name when you call.
Missouri, Montana, Nebraska, and EIN on each sheet.
Do not send deposits directly to an IRS office;
Nevada, North Dakota, Oregon,
South Dakota, Texas, Utah, Accounting Methods otherwise, the association may have to pay a
Washington, Wyoming penalty. Mail or deliver the completed Form 8109
Taxable income must be computed using the with the payment to an authorized depositary,
California (all other method of accounting regularly used in keeping i.e., a commercial bank or other financial
Fresno, CA 93888
counties) the association’s books and records. Generally, institution authorized to accept Federal tax
Virginia Philadelphia, PA 19255 permissible methods include the cash, accrual, deposits.
or any other method authorized by the Internal
Associations having their principal place of Revenue Code. In all cases, the method used Make checks or money orders payable to the
business outside the United States must file with must clearly reflect taxable income. depositary. To help ensure proper crediting, write
the Internal Revenue Service Center, the association EIN, the tax period to which the
Generally, an accrual basis taxpayer can deposit applies, and “Form 1120-H” on the
Philadelphia, PA 19255. deduct accrued expenses in the tax year in check or money order. Be sure to darken the
which (1) all events that determine the liability “1120” box on the coupon. Records of these
have occurred, (2) the amount of the liability can deposits will be sent to the IRS.
be figured with reasonable accuracy, and
Form 1120-H (2000) Page 4
For more information on deposits, see the Address. Include the suite, room, or other unit Foreign tax credit. See Form 1118, Foreign
instructions in the coupon booklet (Form 8109) number after the street address. If a Tax Credit—Corporations.
and Pub. 583, Starting a Business and Keeping pre-addressed label is used, include this Credit for fuel produced from a
Records. information on the label. nonconventional source. See section 29 for a
Caution: If the association owes tax when it files If the Post Office does not deliver mail to the definition of qualified fuels, provisions for figuring
Form 1120-H, do not include the payment with street address and the association has a P.O. the credit, and other special rules.
the tax return. Instead, mail or deliver the box, show the box number instead of the street Qualified electric vehicle credit. See Form
payment with Form 8109 to an authorized address. 8834, Qualified Electric Vehicle Credit, and
depositary, or use EFTPS, if applicable. Note: If a change in address occurs after the section 30.
return is filed, the association can use Form The general business credit (but not the
Estimated Tax, Alternative Minimum 8822, Change of Address, to notify the IRS of investment credit, the Indian employment credit,
Tax, and Certain Tax Credits the new address. the work opportunity credit, the welfare-to-work
These items do not apply to homeowners Employer identification number (EIN). Show credit, or the empowerment zone employment
associations electing to file Form 1120-H. See the correct EIN in the space provided. If the credit). See Form 3800, General Business
the instructions for line 21 below for a list of the association does not have an EIN, it should Credit.
tax credits that do not apply. However, a apply for one on Form SS-4, Application for Note: The association may not claim the
homeowners association that does not elect to Employer Identification Number. If the qualified zone academy bond credit.
file Form 1120-H may be required to make association has not received its EIN by the time
Enter the total amount of credits on line 21
payments of estimated tax. Because the election the return is due, write “Applied for” in the space
and attach the appropriate form(s).
is not made until the return is filed, Form for the EIN. See Pub. 583 for details.
1120-H provides lines for estimated tax Line 22. If the association must recapture any of
Final return, change of address, or amended
payments and the crediting of overpayments the low-income housing credit (or the qualified
return. If the association ceases to exist, file
against estimated tax if payments or electric vehicle credit), include the amount of the
Form 1120-H and check the “Final return” box at
overpayments apply. recapture in the total for line 22. To the right of
the top of the form. If the association has
the entry space, write “LIH recapture” (or “QEV
Interest and Penalties changed its address since it last filed a return,
recapture”) and the amount. See Form 8611,
check the box for “Change of address.”
Interest. Interest is charged on taxes paid late Recapture of Low-Income Housing Credit, and
To amend a previously filed Form 1120-H, file section 42(j) for more details. See Regulations
even if an extension of time to file is granted.
a corrected Form 1120-H and check the section 1.30-1 for details on how to figure the
Interest is also charged on penalties imposed for
“Amended return” box at the top of the form. recapture for the qualified electric vehicle credit.
failure to file, negligence, fraud, gross valuation
overstatements, and substantial understatement Item B—60% exempt function income test. At Backup withholding. If the association had
of tax from the due date (including extensions) to least 60% of the association’s gross income for income tax withheld from any payments it
the date of payment. The interest charge is the tax year must consist of exempt function received, because, for example, it failed to give
figured at a rate determined under section 6621. income (see Definitions on page 2). the payer its correct EIN, include this amount in
Penalty for late filing of return. In addition to Item C—90% expenditure test. At least 90% of the total for line 23g. This type of withholding is
losing the right to elect to file Form 1120-H, a the association’s expenditures for the tax year called “backup withholding.” Show the amount
homeowners association that does not file its tax must consist of expenses to acquire, build, withheld in the blank space in the right-hand
return by the due date, including extensions, manage, maintain, and care for property, and in column between lines 22 and 23g, and write
may be penalized 5% of the unpaid tax for each the case of a timeshare association, for activities “backup withholding.”
month or part of a month the return is late, up to provided to, or on behalf of, members of the
a maximum of 25% of the unpaid tax. The timeshare association. Include current and Paperwork Reduction Act Notice
minimum penalty for a return that is over 60 capital expenditures. Use the association’s
accounting method to figure the total. We ask for the information on this form to carry
days late is the smaller of the tax due or $100. out the Internal Revenue laws of the United
The penalty will not be imposed if the Include: States. You are required to give us the
association can show that the failure to file on 1. Salary for an association manager or information. We need it to ensure that you are
time was due to reasonable cause. Associations secretary. complying with these laws and to allow us to
that file late must attach a statement explaining 2. Expenses for gardening, paving, street figure and collect the right amount of tax.
the reasonable cause. signs, security guards, and property taxes You are not required to provide the
Penalty for late payment of tax. An association assessed on association property. information requested on a form that is subject
that does not pay the tax when due generally 3. Current operating and capital expenditures to the Paperwork Reduction Act unless the form
may be penalized 1⁄2 of 1% of the unpaid tax for for tennis courts, swimming pools, recreation displays a valid OMB control number. Books or
each month or part of a month the tax is not halls, etc. records relating to a form or its instructions must
paid, up to a maximum of 25% of the unpaid be retained as long as their contents may
tax. The penalty will not be imposed if the 4. Replacement costs for common buildings,
heating, air conditioning, elevators, etc. become material in the administration of any
association can show that the failure to pay on Internal Revenue law. Generally, tax returns and
time was due to reasonable cause. Do not include expenditures for property that return information are confidential, as required
Other penalties. Other penalties can be is not association property. Also, do not include by section 6103.
imposed for negligence, substantial investments or transfers of funds held to meet
future costs. An example would be transfers to a The time needed to complete and file this
understatement of tax, and fraud. See sections form will vary depending on individual
6662 and 6663. sinking fund to replace a roof, even if the roof is
association property. circumstances. The estimated average time is:
Recordkeeping 11 hr., 29 min.
Specific Instructions Item D. Enter the association’s total
expenditures for the tax year including those Learning about the
Period covered. File the 2000 return for expenditures directly related to exempt function law or the form 5 hr., 20 min.
calendar year 2000 and fiscal years that begin in income. Use the association’s accounting Preparing the form 13 hr., 12 min.
2000 and end in 2001. For a fiscal year, fill in the method to figure the entry for item D.
tax year space at the top of the form. Copying, assembling,
Item E. Show any tax-exempt interest received and sending the form
Note: The 2000 Form 1120-H may also be used or accrued. Include any exempt-interest dividend to the IRS 2 hr., 9 min.
if (1) the association has a tax year of less than received as a shareholder in a mutual fund or
12 months that begins and ends in 2001 and If you have comments concerning the
other regulated investment company. accuracy of these time estimates or suggestions
(2) the 2001 Form 1120-H is not available at the
time the association is required to file its return. Line 21—Tax credits. The association may for making this form simpler, we would be happy
However, the association must show its 2001 tax qualify for the following tax credits: to hear from you. You can write to the Tax
year on the 2000 Form 1120-H and must Forms Committee, Western Area Distribution
incorporate any tax law changes that are Center, Rancho Cordova, CA 95743-0001. DO
effective for tax years beginning after 2000. NOT send the tax form to this office. Instead,
see Where To File on page 3.