An excuse has been defined as “the skin of a reason stuffed with a lie”. There are two Boardmember sentiments we hear most frequently expressed: “We can’t afford the Reserve Funding Plan” and “We’ll worry about that next year”. But no matter how many times a Boardmember may repeat these sentences, it doesn’t mean they’re true and it doesn’t mean they’re wise. After we look beneath the skin of these two reasons, it may surprise you how differently you feel about these excuses!
The Internal Revenue Service (“IRS”) excludes from an association’s taxable income those amounts which are properly kept and used for capital contributions. In several significant Revenue Rulings, the IRS considered special assessments for major repairs and replacements to be capital contributions in addition to capital contributions to reserve funds from annual assessments.
Flooding caused by Hurricane Irene crippled a centuries-old dam, washed out a county road, and left residents of a private lake community fearing for the future of their scenic home.
Authors: Community Associations Network National
A reserve study is an in-depth evaluation of a property’s physical components and an analysis of its reserve funds. Based on a thorough on-site inspection, a reserve study details anticipated replacements or repairs to common-area elements and recommends annual reserve funding to cover capital expenditures for the next 30 years.
Reserve studies give community association managers, board members and property owners assurance that future major property expenses are identified early and that a funding plan is in place to pay for those expenses.