Best Practices: Are You Submitting Your Annual Report Properly?

California nonprofit corporations serving as the Owners’ Association for a California assessment district formed pursuant to the Property and Business Improvement District Law of 1994 must comply with several important requirements. Staying in compliance is critical to the success of both the assessment district and the nonprofit corporation Owners’ Association. This article provides a summary of key annual compliance requirements for both assessment districts and nonprofit corporation Owners’ Associations.

Assessment Districts

The most important annual compliance requirement for an assessment district is the annual report. The annual report must be filed each year in a timely manner (timing requirements are usually specified in the contract between the local government and the Owners’ Association). Annual reports are often used to showcase the accomplishments and successes of the district. However, it is important that each annual report always includes the information required by Streets and Highways Code section 36650:

• Any proposed changes to the district boundaries, benefit zones, classifications of property, or classifications of businesses;
• The improvements, maintenance, and activities to be provided in the fiscal year;
• An estimate of the cost of providing the improvements, maintenance, and activities in the fiscal year;
• The method and basis of levying the assessment in sufficient detail to allow each real property or business owner to estimate the amount of the assessment to be levied against their property or business in the fiscal year;
• The estimated amount of any surplus or deficit revenues to be carried over from the previous fiscal year; and
• The estimated amount of any contributions to be made from sources other than assessments.

Other important annual compliance requirements for assessment districts include: local government-Owners’ Association contractual requirements, assessment rate increase/decrease approvals, property/business owner information updates, district budget category adjustments, and audit requirements.

Owners’ Associations

California nonprofit corporations that are designated as the Owners’ Association for an assessment district must adhere to all standard compliance requirements for nonprofit corporations. Key requirements include: IRS and FTB tax filings, Secretary of State filings, election of directors and officers, holding the corporation’s annual meeting, reviewing and updating corporate policies, and complying with annual requirements pursuant to the corporation’s bylaws. We recommend that all Owners’ Associations have adopted a conflict of interest and records retention and destruction policy.

Civitas can assist your organization with any compliance related issue. Our services include: preparing district annual reports, providing or updating corporate policies, updating corporate bylaws, and much more! Please contact Civitas if you have any questions on compliance requirements for your assessment district or Owners’ Association.

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