A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development may be exempt as a social welfare organization if it is operated for the benefit of all the residents of the community.

The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof.  There is no precise definition of a community.  Rather, whether an area is a community depends on the facts and circumstances of the particular situation.  Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community.

The association should include with its exemption application evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members.  It also must show that it does not engage in exterior maintenance of private homes.

A homeowners’ association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally may elect under the provisions of Code section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. 

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