By Robert S. Kutner, Esq.
This is an update to the column that appeared in the November/December 2009 issue of Bay State REALTOR® concerning a 2008 law that required all unincorporated associations that file federally as corporations, including most condominiums, to file Massachusetts returns as corporations. Under federal law, homeowners associations, whether incorporated or unincorporated, file a federal corporate return. Imposing the same classification for state tax purposes would have resulted in a substantial increase in tax as well as burdensome record keeping requirements for tax years on or after January 1, 2009.
It was widely believed in the legal community that the change in filing classifications had not been intended to change the taxation of condominiums. Fortunately, the error was corrected and the prior tax classification of condominiums has been restored. The corrective legislation states that an unincorporated entity within the definition of, and electing to be treated as, a homeowners association under federal law and subject to tax for the taxable year is not subject to Massachusetts corporate excise tax.
Instead of filing a corporate excise return, a qualifying homeowners association will continue to file its return under Massachusetts personal income tax provisions.