An unincorporated condominium association, organized under the Real Property Law's condominium act, collects assessments, laundry-machine and pool-guest fees, developer contributions, and rental income from a unit it owns -- but has no capital stock and issues no certificates of membership or ownership interest. Is it a 'corporation' subject to New York's business corporation franchise tax?

Plain-English summary

The condominium association at issue -- unnamed in the petition -- is an unincorporated association organized under Article 9-B of the Real Property Law (New York's condominium act), managing a 160-unit residential development and headed by the unit homeowners themselves. It has written articles of association, but does not issue certificates or any other written instrument to members evidencing an ownership or membership interest, and has no capital stock divided into shares. Its income comes from unit-owner assessments, coin-operated laundry machines, pool guest fees, extra contributions from the development sponsor (beyond the sponsor's own prorated assessment share), and rent from a single unit the association itself owns; that income funds common-area maintenance, individual units' heating fuel, common-area insurance, and a reserve for future improvements.

Article 9-A's franchise tax under Tax Law § 209.1 applies to "corporations." Tax Law § 208.1 defines "corporation" to include "a joint-stock company or association and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by certificate or other written instrument." The Business Corporation Franchise Tax Regulations (20 NYCRR 1-2.3) sharpen this: the terms "joint stock company" and "association" reach only unincorporated entities that have BOTH written articles of association AND capital stock divided into shares.

The condominium association has the first element (written articles of association) but not the second (no capital stock divided into shares) -- and, notably, it doesn't issue any certificate or written instrument evidencing a membership or ownership interest at all. Because it fails the statutory and regulatory definition of "corporation" on those specific grounds, and assuming it isn't otherwise being conducted AS a corporation in substance, the Department concluded it is not subject to the Article 9-A franchise tax, regardless of the fact that it collects dues, fees, and rental income and maintains a capital reserve like many for-profit entities would.

What this means for you

Condominium and homeowner associations organized without capital stock

If your unincorporated condominium or homeowner association has written governing documents but doesn't issue membership certificates or divide interests into capital stock shares, it likely falls outside Article 9-A's definition of a taxable "corporation" -- collecting assessments, running amenities like laundry machines or a pool, and even maintaining a reserve fund doesn't change that conclusion by itself.

The "conducted as a corporation" caveat matters

The Department's conclusion was explicitly conditioned on the association not being "otherwise conducted as a corporation" in substance -- if an association's actual operations functionally resemble a for-profit corporate enterprise beyond simple community management, that could change the analysis even without formal capital stock or certificates.

Contrast with a formally incorporated homeowners association

Compare TSB-A-82(2)C (Cornhill Commons), where a homeowners association WAS incorporated (as a not-for-profit corporation) and easily met the threshold "corporation" test -- but then was found fully TAXABLE anyway, because providing maintenance and upkeep to members counts as "inurement" that defeats New York's not-for-profit exemption. The two rulings show the two very different roads to (non-)taxability: this association escapes tax by failing the corporation definition outright; Cornhill Commons meets the definition but fails the exemption.

Common questions

Q: Does collecting assessments, fees, and rental income make a condominium association a taxable "corporation"?
A: Not by itself. The key statutory test is whether the association has capital stock divided into shares and issues certificates or written instruments evidencing membership or ownership interests -- income collection alone doesn't satisfy that test.

Q: What would make an unincorporated association taxable as a "corporation"?
A: Having written articles of association COMBINED with capital stock divided into shares (the joint-stock-company/association test), or otherwise being conducted as a corporation in substance.

Q: Can another condominium association with a similar no-capital-stock structure rely on this Opinion?
A: No. It binds the Department only as to this specific association's facts and can't be relied upon by other taxpayers, though the statutory "corporation" test it applies (from § 208.1 and 20 NYCRR 1-2.3) is of general application.

Citations and references

Statutes and regulations:

• Tax Law § 209.1 (Article 9-A imposition)
• Tax Law § 208.1 (definition of "corporation")
• 20 NYCRR 1-2.3 (definition of "corporation," "joint stock company," "association")
• Real Property Law, Article 9-B (condominium act)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a82_4c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(4)C
Corporation Tax
March 22, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C811117D

On November 17, 1981, a Petition for Advisory Opinion was received from Arthur J. Giglio,
C.P.A., 50 Brookdale Drive, Yonkers, New York 10710.
The issue raised is whether an unincorporated condominium association organized under
Article 9-B of the Real Property Law is subject to the Franchise Tax on Business Corporations
imposed under Article 9-A of the Tax Law.
The condominium association in question, which is not named in the Petition, is an
unincorporated association organized under Article 9-B of the Real Property Law. The condominium
association has written articles of association but does not issue to its members certificates or other
written instruments which evidence an interest in or ownership of the association. The association
manages a 160 unit development and is headed by unit homeowners. The income of the association
is derived from: 1) assessments received from unit homeowners; 2) coin operated laundry machines
used by unit homeowners; 3) pool guest fees; 4) additional contributions from the development
sponsor in excess of his prorata share of assessments on unit homeowners; 5) a monthly rental
received from a tenant of a unit which is owned by the condominium association. The income is used
to pay for the maintenance of common areas, fuel used to heat individual units of homeowners and
insurance on common areas, among other items. Excess income is allocated to a reserve for future
improvements.
Subdivision one of section 209 of the Tax Law imposes the Franchise Tax on Business
Corporations, as follows:
"For the privilege of exercising its corporate franchise, or doing business, or of employing
capital, or of owning or leasing property in this state in a corporate or organized capacity, or
of maintaining an office in this state, for all or any part of each of its fiscal or calendar years,
every domestic or foreign corporation, except corporations specified in subdivision four of
this section, shall annually pay a franchise tax upon the basis of its entire net income, or upon
such other basis as may be applicable as hereinafter provided . . . . "
The meaning of the term "corporation" is set forth in subdivision one of section 208 of the
Tax Law, as follows:
"The term 'corporation' includes a joint-stock company or association and any business
conducted by a trustee or trustees wherein interest or ownership is evidenced by certificate
or other written instrument .... "
Further elucidation is provided by section 1-2.3 of the Business Corporation Franchise Tax
Regulations, which provides, in part, that:
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-82(4)C
Corporation Tax
March 22, 1982
"(a) The term 'corporation' means an entity created as such under the laws of the United
States, any state, territory or possession thereof, the District of Columbia, or any foreign
country, or any political subdivision of any of the foregoing, which provides a medium for
the conducting of business and the sharing of its gains.
. . . .
(b) The term 'corporation' includes a joint stock company or association and any business
conducted by a trustee or trustees wherein interest or ownership is evidenced by certificate
or other written instrument. An entity conducted as a corporation is deemed to be a
corporation.
1)
The terms 'joint stock company' and 'association' include every unincorporated joint
stock association, joint stock company or enterprise having written articles of association and
capital stock divided into shares. The term 'association' includes a 'joint stock association'.
. . . . " 20 NYCRR 1-2.3
Inasmuch as the condominium association in question is not an entity created in corporate
form, does not issue to its members certificates or other written instruments which evidence an
interest in or ownership of the association, does not have capital stock divided into shares, and
assuming that the association is not conducted as a corporation, the same would not constitute a
corporation for purposes of Article 9-A of the Tax Law and would accordingly not be subject to the
tax imposed under that Article.

DATED: March 17, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau