TAX TREATMENT OF CERTAIN HOUSING ASSOCIATIONS.

SEC. 2101. TAX TREATMENT OF CERTAIN HOUSING ASSOCIATIONS. (a) General Rule.— Subchapter F of chapter 1 (relating to exempt organizations) is amended by adding at the end thereof the following new part: “PART VII— CERTAIN HOMEOWNERS ASSOCIATIONS “Sec. 528. Certain homeowners associations. “SEC. 528. CERTAIN HOMEOWNERS ASSOCIATIONS. “(a) General Rule.— A homeowners association (as defined in subsection (c)) shall be subject to taxation under this subtitle only to the extent provided in this section. A homeowners association shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes. “(b) Tax Imposed.— “(1) In general.—A tax is hereby imposed for each taxable year on the homeowners association taxable income of every homeowners association. Such tax shall consist of a normal tax and surtax computed as provided in section 11 as though the homeowners association were a corporation and as though the 90 STAT. 1898homeowners association taxable income were the taxable income referred to in section 11. For purposes of this subsection, the sur-tax exemption provided by section 11(d) shall not be allowed. “(2) Alternative tax in case of capital gains.— If for any taxable year any homeowners association has a net capital gain, then in lieu of the tax imposed by paragraph (1), there is hereby imposed a tax (if such tax is less that the tax imposed by paragraph (1)) which shall consist of the sum of— “(A) a partial tax, computed as provided by paragraph (1), on the homeowners association taxable income determined by reducing such income by the amount of such gain, and “(B) a tax of 30 percent of such gain. “(c) Homeowners Association Defined.— For purposes of this section— “(1) Homeowners association.— The term ‘homeowners association means an organization which is a condominium management association or a residential real estate management association if— “(A) such organization is organized and operated to provide for the acquisition, construction, management, maintenance, and care of association property, “(B) 60 percent or more of the gross income of such organization for the taxable year consists solely of amounts received as membership dues, fees, or assessments from— “(i) owners of residential units in the case of a condominium management association, or “(ii) owners of residences or residential lots in the case of a residential real estate management association. “(C) 90 percent or more of the expenditures of the organization for the taxable year are. expenditures for the acquisition, construction, management, maintenance, and care of association property, “(D) no part of the net earnings of such organization inures (other than by acquiring, constructing, or providing management, maintenance, and care of association property, and other than by a rebate of excess membership dues, fees, or assessments) to the benefit of any private shareholder or individual, and “(E) such organization elects (at such time and in such manner as the Secretary by regulations prescribes) to have this section apply for the taxable year. “(2) Condominium management association.— The term ‘condominium management association’ means any organization meeting the requirement of subparagraph (A) of paragraph (1) with respect to a condominium project substantially all of the units of which are used as residences. “(3) Residential real estate management association.— The term ‘residential real estate management association’ means any organization meeting the requirements of subparagraph (A) of paragraph (1) with respect to a subdivision, development, or similar area substantially all the lots or buildings of which may only be used by individuals for residences. “(4) Association property.— The term ‘association property’ means— “(A) property held by the organization, 90 STAT. 1899 “(B) property commonly held by the members of the organization, _ “(C) property within the organization privately held by the members of the organization, and “(D) property owned by a governmental unit and used for the benefit of residents of such unit. “(d) Homeowners Association Taxable Income Defined.— “(1) Taxable income defined.— For purposes of this section, the homeowners association taxable income of any organization for any taxable year is an amount equal to the excess (if any) of— “(A) the gross income for the taxable year (excluding any exempt function income), over “(B) the deductions allowed by this chapter which are directly connected with the production of the gross income (excluding exempt function income), computed with the modifications provided in paragraph (2). “(2) Modifications.— For purposes of this subsection— “(A) there shall be allowed a specific deduction of $100, “(B) no net operating loss deduction shall be allowed under section 172, and “(C) no deduction shall be allowed under part VIII of subchapter B (relating to special deductions for corporations). “(3) Exempt function income.— For purposes of this subsection, the term ‘exempt, function income’ means any amount received as membership dues, fees, or assessments from— “(A) owners of condominium housing units in the case of a condominium management association, or “(B) owners of real property in the case of a residential real estate management association.” (b) Section 216(c) (relating to treatment of property subject to depreciation) is amended by adding at the end thereof the following new sentence: “The preceding sentence shall not be construed to limit or deny a deduction for depreciation under 167(a) by a cooperative housing corporation with respect to property owned by such a corporation and leased to tenant-stockholders.” (c) Requirement of Return.— Section 6012(a) (relating to persons required to make returns of income) is amended by striking out “and” at the end of paragraph (5), by inserting “and” at the end of paragraph (6), and by inserting after paragraph (6) the following new paragraph: “(7) Every homeowners association (within the meaning of section 528(c)(1)) which has homeowners association taxable income (within the meaning of section 528(d)) for the taxable year.” (d) Clerical Amendment.— The table of parts for subchapter F of chapter 1 is amended by adding at the end thereof the following new item: “Part VII. Certain homeowners associations.” (e) Effective Date.— Except as provided in subsection (f)(2), the amendments made by this section shall apply to taxable years beginning after December 31, 1973. (f) Certain Stock of Cooperative Housing Corporations.— (1) Section 216(b) is amended by adding at the end thereof the following new paragraph: 90 STAT. 1900 “(5) Stock acquired through foreclosure by lending institution.— If a bank or other lending institution acquires by foreclosure (or by instrument in lieu of foreclosure) the stock of a tenant-stockholder, and a lease or the right to occupy an apartment or house to which such stock is appurtenant, such bank or other lending institution shall be treated as a tenant-stockholder for a period not to exceed three years from the date of acquisition. The preceding sentence shall apply even though, by agreement with the cooperative housing corporation, the bank (or other lending institution) or its nominee may not occupy the house or apartment without the prior approval of such corporation.” (2) The amendment made by paragraph (1) shall apply to stock acquired by banks or other lending institutions after the date of the enactment of this Act.