That does not mean that the areas in question have been subjected to capital improvements as the IRS understands them. If, for example, the area in question is a forest that was thinned for fire protection purposes, non-native plants were removed, and natives reestablished, I promise you, that does not come cheap and constitutes a capital expense and an improvement. Nor are the expenses and management overhead for maintenance insignificant. Nor are the expenses and management overhead for maintenance insignificant.
These are all expenditures that would constitute legitimate deductions against an HOA's gross income when they file their tax returns.
All HOAs are required to file income tax returns, but even as a "for-profit" corporation an HOA managed (and advised) by competent people will pay very little in income taxes. An HOA is subject to special provisions under the U.S. tax code that allows it to shield most of its income from taxation, but only if its accounting work is done correctly.
My first post was not about this case. It was about whether the IRS could hold the lack of sidewalks etc. as a lack of capital improvement.
These are all expenditures that would constitute legitimate deductions against an HOA's gross income when they file their tax returns.
On the other hand, the contributors could not deduct their contributions, and there's the rub. Yet major charitable foundations make similar improvements to habitat and their owners obtain those deductions.