The Texas AP 206 form is an application designed for homeowners' associations seeking exemption from Texas franchise tax. This form is specifically for nonprofit corporations that manage residential properties, ensuring they meet the legal requirements for tax exemption. If you are part of a homeowners' association and wish to apply for this exemption, fill out the form by clicking the button below.
When filling out the Texas AP 206 form, there are important dos and don’ts to keep in mind. Following these guidelines can help ensure a smoother application process for your homeowners’ association.
By adhering to these tips, you can help facilitate the review process and increase the likelihood of obtaining the desired tax exemption for your homeowners’ association.
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 _________________________________
Texas Public Information Report - Directors are required to be at least three individuals to meet the minimum requirement.
Texas Law Help FM-DivC-100 Original Petition for Divorce Set C - This document serves to keep all parties informed about the divorce intent.
The Texas AP 206 form is essential for homeowners' associations seeking exemption from franchise tax. Alongside this application, several other documents are often required to substantiate the exemption claim. Below is a list of key forms and documents that may accompany the AP 206 form.
These documents collectively support the homeowners' association's application for tax exemption. Ensuring that all required paperwork is complete and accurate can facilitate a smoother review process by the Texas Comptroller of Public Accounts.
When filling out the Texas AP 206 form, individuals often make several common mistakes that can delay the application process or lead to rejection. Understanding these pitfalls can help ensure a smoother experience when applying for tax exemption as a homeowners’ association.
One frequent error is failing to provide the correct documentation. The form requires specific documents, such as the Articles of Incorporation or the association’s Declaration. If these documents are not included or are not the correct versions, the application may be deemed incomplete. It's essential to verify that the documents submitted accurately reflect the governing rules of the association.
Another common mistake is miscounting the number of lots or units. In Item 2, applicants must enter the total number of lots as shown on the plat map. If this number is incorrect, it can lead to inconsistencies in the application. Additionally, in Items 3 and 4, it is crucial to ensure that the totals accurately reflect ownership. Discrepancies between these items can raise red flags during the review process.
Some applicants overlook the importance of specifying voting rights in Item 5. The form requires details about different classes of votes, if applicable. If the declaration provides for different classes but this information is not included, it may result in an incomplete application. Providing clear and accurate details about voting rights helps establish the association's compliance with the necessary regulations.
Additionally, applicants sometimes neglect to include the title and citation of the documents from which they have taken language for Items 5a, 5b, and 5c. This information is critical for verifying the claims made in the application. Omitting these details can lead to confusion and may require the applicant to resubmit their application with the necessary information.
Another mistake involves misunderstanding the ownership requirements. The form stipulates that individual resident owners must control at least 51% of the association's votes. If an applicant incorrectly includes lots owned by developers or banks in the count of individual owners, this can jeopardize the application. It is important to carefully assess ownership to ensure compliance with this requirement.
Lastly, applicants may not pay attention to the submission process. The completed application must be sent to the correct address, along with all required documentation. Sending the application to the wrong location can cause significant delays. It is advisable to double-check the address and ensure that all materials are included before mailing the application.
Misconception 1: Homeowners’ associations automatically qualify for tax exemption.
Many people believe that simply being a homeowners’ association guarantees a tax exemption from franchise tax in Texas. However, this is not the case. To qualify, the association must be a nonprofit corporation that is organized and operated specifically for managing residential properties. It must also meet certain criteria, such as having at least 51% of the voting control held by individual resident owners.
Misconception 2: The exemption applies to all types of property.
Another common misunderstanding is that the exemption applies to any property owned by the association. In reality, the exemption is limited strictly to residential properties. If there is any commercial activity or property involved, the association cannot qualify for the tax exemption. This restriction is essential to maintain the integrity of the residential purpose of the association.
Misconception 3: All residents can vote regardless of ownership.
Some individuals may think that all residents of a community can participate in voting matters, but this is not true. Only individual resident owners, who collectively hold at least 51% of the votes, can exercise voting rights within the association. This ensures that the governing body is truly representative of the homeowners, rather than external parties like developers or banks.
Misconception 4: The application process is straightforward and quick.
While the application for tax exemption may seem simple, it often requires careful documentation and adherence to specific guidelines. After submitting the application, the association must wait for the comptroller’s office to review it, which can take time. Additionally, the office may request further information, adding to the overall duration of the process. Patience and thorough preparation are key to successfully navigating this procedure.
The Texas AP 206 form is essential for homeowners' associations seeking exemption from franchise tax. Here are key takeaways regarding its completion and use:
Filling out the Texas AP 206 form is a straightforward process, but accuracy is essential. This form is used by homeowners’ associations to request exemption from Texas franchise tax. After completing the form, submit it along with any required documentation to the Texas Comptroller of Public Accounts. You can expect a response within ten working days regarding your application status.