As we wrap up the month of January, it’s crucial for HOA and condo boards to address essential “housekeeping” matters. In this blog, we’ll guide you through key tasks that your board should consider in the early months of 2024. From filing the annual report with the Arizona Corporation Commission to ensuring proper insurance coverage, preparing taxes, conducting financial audits, and planning the annual meeting, these proactive steps will help your association maintain compliance, financial health, and smooth operations. Let’s review each item to ensure your community starts the year on a strong and organized footing.
- File Annual Report with the Arizona Corporation Commission
Why is it important to file an annual report? Most community associations are incorporated as nonprofit corporations under Arizona law. Pursuant to Arizona law (A.R.S. Section 10-11622), all nonprofit corporations must prepare and file an annual report on a form provided by the Arizona Corporation Commission (“ACC”) and pay a filing fee to the ACC each year on or before the due date assigned by the ACC. One of the major benefits of structuring an association as a nonprofit corporation is protection of the association’s officers, directors and members from personal liability for the corporation’s debts and liabilities. The ACC offers an online reminder to ensure that associations file their annual report on time. We encourage you to sign your association up for this free reminder. For online information go to the Commission’s webpage, www.azcc.gov and follow the necessary prompts.
- Check Your Insurance Coverage
The beginning of the New Year is a good time to review the association’s insurance policy to confirm that coverage suits the association’s needs and calendar when renewal is necessary. In addition to the premium costs, the association should also review the CC&Rs to make sure coverage is in compliance with the governing documents (don’t be under or over insured) and, given the recent changes in the real estate economy, consider having the property re-appraised.
- Prepare Taxes
For tax purposes, the IRS treats community associations like corporations, and therefore, they are required to file federal and state tax returns. Tax returns are due March 15th or 75 days after the close of your tax year if your association is not on a calendar year basis. With an extension, you have up to six extra months to file. There are two possible IRS forms to use – 1120-H or 1120 – dependent on your association. Whether you are a planned community, condominium or self-managed, we suggest that you hire a CPA with planned community and condo association experience to complete and file your association’s taxes.
- Prepare an Audit, Compilation or Review
Pursuant to A.R.S. 33-1810 (planned communities) / A.R.S. 33-1243 (condominiums), the board of directors is required to conduct a financial audit, review or compilation of the association annually. The annual audit, review or compilation shall be completed no later than 180 days (6 months) after the end of each fiscal year and shall be made available upon request to the members within 30 days of its completion. If the association’s documents require an annual audit by a certified public accountant, then the association must hire a certified public accountant to conduct the audit.
- Plan the Annual Meeting
Under Arizona law, an association must conduct an annual meeting of its membership at least once a year. Typically, an association’s bylaws will set forth the requirements and will also serve as the timeline and guide for the planning of the annual meeting, to include the notice, quorum and voting.