IRS Revenue Ruling 70-604

This site provides information regarding IRS Revenue Ruling 70-604, which has been subject to many questions and much misinterpretation.  We believe that Revenue Ruling 70-604 is one of the most powerful and important tax planning tools that exists for homeowners associations that file Form 1120.  We hope that you will find the information on this site helpful in understanding how the Revenue Ruling works.

Background information on Revenue Ruling 70-604

Revenue Ruling 70-604 was published by the IRS (Internal Revenue Service) in 1970 in response to tax practitioners' requests for some sort of relief from the inherent inequities of homeowners associations filing Form 1120, at that time the only tax filing option for non exempt homeowners associations.  This ruling is viewed as an elective, beneficial, ruling.  Elective, because it does not automatically apply, and beneficial because there is no downside risk to making an election under Revenue Ruling 70-604.

The purpose of Revenue Ruling 70-604 is to allow a homeowners association to avoid taxation on its excess membership income by either refunding it to members, or carrying over the excess to the following tax year.

The IRS is required to follow revenue rulings it has issued, but only where a taxpayer’s situation is substantially similar to the ruling issued (this is an important point in understanding the limitations of Revenue Ruling 70-604).



This site is maintained by Gary Porter, CPA, a veteran in homeowners association taxation matters, in collaberation with with other industry CPA firms.  See Industry Links page for a listing by state of CPAs specializing in the homeowners association industry.  Questions on Revenue Ruling 70-604 should be directed to the CPA firm listed for your state.  If your state is not listed, please contact Gary Porter, CPA.


For more information on Association Accounting and Taxation visit these websites:

For more information on HOA Taxation

Associations exempt from tax under IRC Section 501(c)(4)

Form 1120-H and 1120 tax preparation services