I wish I could tell you it isn't so, but it is so. The legislature, at the behest of the Governor, passed legislation which was touted as closing tax “loopholes.” However, it had what is referred to as “unintended consequences” which nobody thought of when the legislation was passed.

As a matter of federal law, condominium associations are required to file a federal tax return even if there is no tax due. The Massachusetts legislation provided that if an organization is required to file a federal tax return, they must file a Massachusetts tax return even if there is no tax due. Because a corporate tax return is required to be filed, a minimum tax of $456 must be paid with the tax return. The tax return must be a corporate form of return because under federal tax law, that is what would be required to be filed by a condominium association. The law applies to associations of all sizes even if it is a two-unit condominium building where the owners may not even have a separate condominium association bank account because the owners pay the bills as they come in directly for their share of the costs. Under a Massachusetts condominium law, there must be an owners organization even if one is not actually operated as such. Most condominium associations have negligible income because the only source of income would be interest, as a rule.

The obligation to file a federal tax return by condominium associations, one would guess, has been largely ignored by the owners of most condominium units. Large condominiums, managed by management companies, may in fact file a federal tax return, but there is really no way, given the multiplicity of condominiums in the Commonwealth, to determine the filing percentage rate. As a practical matter nobody really cared. However because of this new Massachusetts law, potential buyers of condominium units may be concerned if an association has not been paying the minimum Massachusetts tax. They may also be concerned about their legal obligation to comply with the law to file the return and pay the tax.

The Massachusetts Department of Revenue has a six-year statute of limitations so the amount that could possibly be a problem should be capped at around $2736 plus any penalties or interests that may be applicable. There are criminal penalties attached to not filing but the penalty is a percentage of the tax actually due which in all likelihood is zero dollars anyway. You may want to contact your State Representative and State Senator and tell them about your displeasure and ask them to legislate this annoyance away.