The Texas AP 206 form is an application used by homeowners’ associations to request an exemption from the Texas franchise tax. This exemption applies only to nonprofit corporations that manage residential properties and have specific voting control requirements. To ensure your association qualifies, complete the form accurately and submit it by clicking the button below.
The Texas AP 206 form serves as an essential tool for homeowners' associations seeking exemption from the Texas franchise tax. Designed specifically for nonprofit corporations, this application allows associations to formally request tax relief, provided they meet certain criteria. The exemption applies solely to franchise tax reports due on or after May 1, 1982, and is intended for organizations that are primarily focused on managing, constructing, and maintaining residential properties. To qualify, the association must ensure that the property in question is exclusively residential and devoid of any commercial activity. A key requirement is that at least 51% of the voting control must rest with the individual resident owners of the lots or units, thereby ensuring that the association is genuinely representative of its community members. The legal framework for this exemption is found in Section 171.082 of the Texas Tax Code, with further guidance provided in Franchise Tax Rule 3.541. In addition to franchise tax exemptions, the form also touches on sales tax exemptions for qualifying organizations under federal tax codes. Applicants must submit the completed form along with any required documentation to the Texas Comptroller of Public Accounts, which will review the application and communicate the status within ten working days. This process underscores the importance of thorough record-keeping and compliance with state regulations, as the comptroller retains the right to audit the association's records at any time to verify its exempt status.
APPLICATION FOR EXEMPTION — HOMEOWNERS’ASSOCIATION
SUSAN COMBS • TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
A nonprofit corporation that is a homeowners’ association should use this application to request exemption from Texas franchise tax. The homeowners’ association exemption extends only to franchise tax and is applicable to franchise tax reports due on or after May 1, 1982.
To receive a state franchise tax exemption as a homeowners’ association, the association must be a nonprofit corporation organized and operated primarily to obtain, manage, construct and maintain the property in or of a residential condominium or residential real estate development that is legally restricted for use as residences. The property cannot be used for any commercial activity. Additionally, the individual resident owners of the lots, residences or residential units must have at least 51% voting control of the association.
The exemption for a homeowners’ association is provided for in Section 171.082, Texas Tax Code, and more detailed information is available in Franchise Tax Rule 3.541.
Texas tax law provides an exemption from sales tax on goods and services purchased for use by organizations exempt under Section 501(c)(3), (4), (8), (10) or (19), Internal Revenue Code (IRC). However, exempt organizations are required to collect tax on most of their sales of taxable items. See Exempt Organizations, Sales and Purchases, Publication 96-122.
Texas law also provides an exemption from franchise taxes for corporations exempted from the federal income tax under IRC Section 501(c)(2), (3), (4), (5), (6), (7), (8), (10), (16), (19) or (25).
If your organization has been granted federal tax exemption under one of the qualifying sections listed above, your organization will be granted an exemption from Texas franchise tax, or sales and franchise tax, on the basis of the Internal Revenue Service (IRS) exemption, as required by state law. Organizations that qualify for state tax exemption based on the federal exemption are not exempt from hotel occupancy tax because the hotel occupancy tax law does not recognize any federal exemptions.
The laws, rules and other information about exemptions are online at:
http://window.state.tx.us/taxinfo/exempt
Send the completed application along with all required documentation to:
Comptroller of Public Accounts
Exempt Organizations Section
P.O. Box 13528
Austin, Texas 78711-3528
We will contact you within 10 working days after receipt of your application to let you know the status of your application. We may require an organization to furnish additional information to establish the claimed exemption. After a review of the material, we will inform the organization in writing if it qualifies for exemption. The comptroller or an authorized representative of the comptroller may audit the records of an organization at any time during regular business hours to verify the validity of the organization’s exempt status.
If you have questions or need more information, contact our Tax Assistance staff at 1-800-252-5555 or, in Austin, call 463-4600.
You have certain rights under Chapters 552 and 559, Government Code, to review, request, and correct information we have on file about you. Contact us at the address or toll-free number listed on this form.
AP-206-1 (Rev.1-07/4)
AP-206-2 (Rev.1-07/4)
SPECIFIC INSTRUCTIONS
Item 1. The filed document of record, and any subsequent amendments, that establishes the purpose of the property usually provides the qualifications for association membership, owners’ voting rights and whether the property is held exclusively for residential use. This document and the plat map are filed with the local county clerk’s office, and may be referred to as the:
•Declaration;
•Deed Restrictions;
•Covenants, Conditions and Restrictions, or similar titles.
To complete Item 1, take the language directly from the appropriate controlling document, which is normally the Articles of Incorporation but may be the association’s Declaration or Bylaws. Also, specify in Item 1 the title of the document and the specific citation from which the language was taken.
Item 2. To be eligible for exemption as a homeowners’ association, the property must be residential and have no commercial property within the real estate development. A condominium project or real estate development is considered residential if the property is legally restricted for use as residences, with no commercial use allowed.
To complete Item 2, enter the total number of lots/units as shown on the plat map for the real estate development. The plat map should be on file with the local county clerk’s office.
Item 3. To complete Item 3, enter the total number of lots/units owned by the individual resident owners. Do not include any lots/units owned by the declarants, developers, builders, banks, investors or similar parties. Do not include multiple-owned lots by an individual owner, unless an exception applies. An exception occurs when an individual owner purchases two lots to construct a single residential structure; in that case, the adjacent lot would be considered as being owned by the individual resident owner, and the lot should be included in the total reported in Item 3.
Item 4. To complete Item 4, enter the total number of lots not included in Item 3. Include multiple- owned lots by an individual owner, and all lots/units owned by parties other than the individual resident owners. Attach a list identifying these owners and the number of lots owned.
In order to qualify for exemption as a homeowners’ association, these parties cannot control more than 49% of the association’s total votes. Majority control cannot be held by a single individual or family, or by one or more developers, declarants, banks, investors or similar parties.
Item 5. If the answer to number 5 is yes, also complete Items 5a and 5c. If the answer to number 5 is no, also complete Items 5b and 5c. For 5a, 5b and 5c, take the language directly from the controlling documents. If the language is not found in the declaration, then look for it in the Articles of Incorporation or bylaws. Also, provide the title of the document from which the language was taken.
AP-206-3
(Rev.1-07/4)
TEXAS APPLICATION FOR STATE TAX EXEMPTION
• TYPE OR PRINT
FOR HOMEOWNERS’ ASSOCIATIONS
• Do NOT write in shaded areas.
Page 1
PLEASE COMPLETE THE FOLLOWING INFORMATION
1.SEE INSTRUCTIONS The primary purpose of the corporation as quoted directly from the association's Articles of Incorporation, Declaration, or Bylaws, including any subsequent amendments, is
as found in
(Title of document and cite from which the language was taken)
2. SEE INSTRUCTIONS Number of lots/units shown on the plat map for the real estate development ..........
3. SEE INSTRUCTIONS Number of residential lots/units owned by individual owner .....................................
4.SEE INSTRUCTIONS Number of lots/units units owned by declarant, developers, builders,
banks, investors, or other similar parties .....................................................................................................
Items 3 and 4 must equal the total reported in Item 2.
....................................5. SEE INSTRUCTIONS Does the Declaration provide for different classes of votes?
YES
If YES, must complete 5a and 5c. If NO, must complete 5b and 5c.
5a. Enter the voting rights for each class of member, as found in:
NO
CLASS A:
CLASS B:
(List additional classes if necessary)
5b. Enter the language that identifies the number of votes each member is entitled to, including the declarant’s voting rights.
Title of document and cite from which 5b was taken:
5c. List conditions that determine when the Declarant’s voting rights ceased, or converted to other conditions allowing the individual owners to gain voting control of the association.
Title of document and cite from which 5c was taken:
6. Based on the information provided above, the date the individual resident owners
Month Day Year
collectively gained voting control (at least 51 percent) of the association was:
7.Corporation name (For Texas corporations, name must match the official corporate name as on file with the Texas Secretary of State. For out-of-state corporations, name must match the official corporate name as filed in the home state of charter)
(CONTINUED ON BACK SIDE)
AP-206-4 (Rev.1-07/4)
Page 2
8.
Name, address and daytime phone number of person submitting this application
Name
Title
Firm or Company Name
Daytime Phone (Area code and number)
Extension
Address
City
State
Zip
9.
Texas taxpayer number
10.
Federal employers identification number (if applicable)
11.For TEXAS corporations, filing information issued by the Secretary of State:
File Number ............................................
File Date ...................................
12. For NON-TEXAS corporations, filing information issued by the Texas Secretary of State:
Certificate of Authority File Number ..........
Home State
Date of
of Incorporation
Incorporation
Home State Filing
or Registration Number
I, _____________________________________________ , ________________________________________________
(Name)(Title)
of ________________________________________________________________________________________ , affirm
(Corporation Name)
the homeowner's association is a nonprofit corporation.
I further state that the corporation is organized and operated primarily to obtain, manage, construct, and maintain property in or of a residential condominium or residential real estate development.
The corporation will maintain proof that the condominium project or real estate development is legally restricted for use as residences, with no commercial use allowed, and will also maintain proof that the collective resident owners of individual lots, residences, or units control at least 51 percent of the votes of the corporation.
___________________________________________________ DATE _________________________________
Completing the Texas AP 206 form is essential for homeowners' associations seeking exemption from franchise tax. Follow these steps carefully to ensure that the application is filled out correctly and submitted with the required documentation.
Once completed, send the application along with all required documentation to the Comptroller of Public Accounts at the address provided. Expect to receive a response regarding the status of the application within 10 working days.
The Texas AP 206 form is designed for homeowners' associations to apply for exemption from the Texas franchise tax. This exemption is specifically for nonprofit corporations that are primarily organized to manage, construct, and maintain residential properties. The exemption applies only to franchise tax reports due on or after May 1, 1982, and is contingent upon meeting certain criteria outlined in Texas law.
To qualify for the exemption, the homeowners' association must be a nonprofit corporation. The property in question must be legally restricted for residential use, with no commercial activities allowed. Additionally, individual resident owners must collectively hold at least 51% of the voting control within the association. This ensures that the interests of the residents are prioritized in the management of the property.
When filling out the AP 206 form, it is essential to provide specific documentation, including:
These documents help verify that the association meets the necessary criteria for exemption.
Once the completed application is submitted, the Texas Comptroller's office will review it and contact the association within 10 working days to provide an update on the application status. If additional information is needed, the office will reach out to the association to request it.
If the homeowners' association qualifies for the exemption, the Comptroller's office will send a written notification confirming the exemption status. This exemption will relieve the association from paying the Texas franchise tax, which can significantly benefit the financial health of the organization.
If the application is denied, the homeowners' association will receive a written explanation detailing the reasons for the denial. The association has the right to appeal the decision or provide additional information to support its case. It is advisable to consult with tax assistance staff for guidance on the next steps in such situations.
Incomplete Documentation: One of the most common mistakes is failing to include all necessary documents when submitting the application. Ensure that you attach the appropriate controlling documents, such as the Articles of Incorporation or Bylaws, along with the application.
Incorrect Information: Providing inaccurate details about the property can lead to denial of the exemption. Double-check the number of lots/units and ensure that they match the information on the plat map.
Ignoring Voting Control Requirements: The application requires that individual resident owners control at least 51% of the votes. Many applicants overlook this requirement, which can result in disqualification.
Misclassifying Ownership: It’s crucial to correctly identify the ownership of the lots/units. Mistakes often occur when applicants include properties owned by developers or banks in the count of residential units owned by individual residents.
Failure to Cite Sources: When completing certain items, applicants must take language directly from the controlling documents. Failing to provide the title and citation for these documents can lead to confusion and potential rejection.
Not Following Instructions: Each item on the form has specific instructions. Ignoring these instructions or misinterpreting them can result in incomplete or incorrect submissions.
Missing Contact Information: Providing insufficient contact details can hinder communication regarding the application status. Always ensure that the daytime phone number and address are accurate and complete.
The Texas AP 206 form is essential for homeowners’ associations seeking exemption from franchise tax. Along with this form, several other documents are commonly required to support the application. Each of these documents plays a crucial role in establishing the eligibility and compliance of the association with state regulations.
When submitting the AP 206 form, it is important to include these supporting documents to strengthen the application for tax exemption. Proper documentation can streamline the review process and help the homeowners’ association achieve its goal of maintaining its nonprofit status.
The Texas Form 501(c)(3) Application is similar to the Texas AP 206 form in that it is used by nonprofit organizations to apply for tax-exempt status. Both forms require detailed information about the organization’s structure and purpose. The 501(c)(3) application specifically focuses on organizations that are charitable, religious, or educational, while the AP 206 is tailored for homeowners' associations. Each form necessitates proof of nonprofit status and requires the submission of governing documents to verify compliance with state and federal regulations.
The IRS Form 1023 is another document that shares similarities with the Texas AP 206 form. This form is used by organizations seeking federal tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. Like the AP 206, it requires the organization to demonstrate that it operates primarily for exempt purposes and does not engage in commercial activities. Both forms involve a comprehensive review of the organization's bylaws and articles of incorporation to ensure they align with the stated purpose and restrictions of tax-exempt status.
The Texas Form 50-114 is a sales tax exemption application that resembles the AP 206 form in its intent to secure tax exemptions for specific organizations. While the AP 206 is focused on franchise tax exemption for homeowners' associations, the Form 50-114 is aimed at obtaining sales tax exemptions for qualifying nonprofit organizations. Both forms require documentation that confirms the organization’s nonprofit status and purpose, ensuring compliance with state tax laws.
The Texas Form 05-102 is used for requesting a franchise tax exemption for certain nonprofit organizations, similar to the AP 206 form. This form is applicable to organizations that meet specific criteria under Texas law. Both documents require the submission of foundational documents, such as articles of incorporation, and they assess the organization’s primary purpose to ensure it qualifies for the exemption being sought.
The IRS Form 990 is an annual reporting form that tax-exempt organizations must file, sharing similarities with the AP 206 form in that both require organizations to disclose financial and operational information. While the AP 206 is an application for exemption, Form 990 serves as an ongoing compliance tool that ensures organizations continue to meet the requirements for tax-exempt status. Both forms emphasize transparency and accountability in nonprofit operations.
The Texas Form 05-167 is another application for exemption from franchise tax, comparable to the AP 206 form. This form specifically targets nonprofit organizations that do not operate as homeowners' associations but still seek similar tax benefits. Both forms require a demonstration of the organization’s nonprofit status and compliance with applicable laws, highlighting the importance of proper documentation and adherence to state regulations.
The Texas Form 50-772 is a request for exemption from the hotel occupancy tax, which, like the AP 206 form, is designed for organizations seeking specific tax exemptions. While the AP 206 focuses on franchise tax for homeowners' associations, the Form 50-772 is tailored for entities involved in the hospitality industry. Both forms necessitate a clear presentation of the organization’s purpose and a commitment to maintaining compliance with the relevant tax laws.
The Texas Form 05-164 is used by certain nonprofit corporations to apply for franchise tax exemption, paralleling the AP 206 form in its purpose. This form requires organizations to provide evidence of their nonprofit status and adherence to state regulations. Both applications emphasize the importance of providing accurate information and supporting documents to establish eligibility for the requested tax exemption.
The IRS Form 1024 is a request for recognition of exemption under Section 501(a) for organizations not described in other sections, similar to the AP 206 form. This form is used by organizations seeking federal tax-exempt status that may not fit the typical categories. Both the Form 1024 and the AP 206 require detailed information about the organization’s structure and purpose, ensuring compliance with tax laws and regulations.
The Texas Form 50-776 is a request for exemption from the franchise tax for certain organizations, much like the AP 206 form. This form is designed for specific nonprofit entities, requiring them to demonstrate their eligibility for tax exemption. Both forms necessitate the submission of governing documents and a clear outline of the organization’s primary purpose to qualify for the tax benefits being sought.
When filling out the Texas AP 206 form for homeowners’ associations, it is essential to follow specific guidelines to ensure a smooth application process. Here’s a list of things to do and avoid:
Following these guidelines can help ensure that your application for exemption is processed efficiently and accurately.
Here are some common misconceptions about the Texas AP 206 form, which is used for homeowners' associations to apply for tax exemption:
This form can be used by any homeowners' association, regardless of size, as long as it meets the eligibility requirements for tax exemption.
The property must be strictly residential. Commercial activities are not allowed, and the development must be legally restricted for residential use.
Even if an association has federal tax exemption, it still needs to file the AP 206 form to receive a state exemption from Texas franchise tax.
To qualify for the exemption, individual resident owners must collectively hold at least 51% of the voting control in the association.
Submitting the form does not automatically grant exemption. The application will be reviewed, and the association will be notified of its status.
All required documentation must accompany the application to demonstrate eligibility for the exemption.
The AP 206 form must be submitted for franchise tax reports due on or after May 1, 1982. Timeliness is crucial to ensure compliance.
The exemption from the AP 206 form specifically applies to franchise tax. It does not cover other taxes, such as hotel occupancy tax.
Existing homeowners' associations can also apply for exemption using the AP 206 form, provided they meet the necessary criteria.
When filling out the Texas AP 206 form for homeowners' associations, there are several important points to keep in mind. Here are some key takeaways:
By following these guidelines, you can navigate the application process more smoothly and increase your chances of successfully obtaining the tax exemption for your homeowners' association.