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Hello. To answer your question, you are correct that all outstanding years should be filed. Since the 1120H election needs to be made on a timely filed return, you are correct that this election could not be made for any past due returns. While the election to apply revenue ruling 70-604 is quite vague, I would caution you against making this election for any past due returns, since that would subject you to high audit risk. I see no issues with making this election at the annual meeting of the association prior to the year ending. Also, regarding PA, the association would be exempt from the capital stock/franchise tax/filing Form RCT-101. Feel free to respond if you have any other questions. If I have completely answered your question, please rate the answer only once you are fully satisfied. Thank you.
Regarding your question on the Revenue Ruling 70-604, you just need to make sure there is proper documentation in the minutes for the actual election. The actual calculations themselves should be prepared by your CPA, so that should take care of the rest of the support. Is your condo association incorporated as a corporation? If so, it would not file a partnership return. Also, the BIRT and NPT taxes are Philadelphia only taxes, so you would have to be within the city limits for them to apply for one. Secondly, your association is not organized as a for profit enterprise I believe. Therefore, it would not need to file BIRT or NPT. For this reason, the Federal 1120 should suffice for income tax filing requirements. No other PA filings are required. Feel free to respond if you have any further questions. Thank you.
Thank you for your response. To answer your question, there is no specific guidance on when the election must be made, but for proper documentation and to be conservative, I suggest the election be made in the minutes. For the initial year, you could note in the minutes that the election is being made prior to filing the return, but that would involve more risk on your end. Given you have stated your risk tolerance is conservative, I would advise preparing all past returns with no election, as you suggested. I have yet to see a condo association that is unincorporated file as a partnership, although you would do so if not filing IRS Form 8832. I would advise that you examine this form and attempt to make a late election under reasonable cause. This would allow the unincorporated association to file as a corporation instead of a partnership. On the topic of Philadelphia taxes, the normal conduct of a condo association such as receiving assessments and providing for the citizens would not be taxable, since there is no profit motive. In a scenario where the condo association is renting out property or deriving income from investments in Philadelphia, those activities would be taxable. My primary source for this material is Section 103 of the Philadelphia BIRT regulations. In your case, you may also wish to confirm with the city directly that the condo association is not taxable, especially if non-traditional activities are being performed by the association. I want to make sure all of your questions are answered, so please feel free to respond for any other clarification. Once we have reached full satisfaction on the answer, feel free to rate the answer. Thank you.