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I guess I’m stumped as to what’s going on here.

Does the fact that there are no sidewalks or bicycle lanes disqualify it for historical status?

Were expenditures on sidewalks or bicycle lanes claimed on the organization’s Form 990?

Also what if there is no money in the HOA accounts? Do they go after the officers? By the way there are no bicycle lanes in my neighborhood - there are some sidewalks but they are maintained by the city, not the HOA. Does that make the HOA taxable?

I did run for HOA office a couple of years ago and didn’t win. Maybe I was lucky.

I don't think this has anything to do with "historical status" at all. Here's how I understand this case:

1. The HOA qualified as a 501(c)(4) non-profit organization on the grounds that the common areas included streets, sidewalks and/or bike lanes that were open to the public, and therefore the HOA provided a "public benefit" to people regardless of whether or not they were owners or visitors to the owners.

2. The IRS looked into it and determined that the HOA did not qualify as a 501(c)(4) organization because it didn't adequately serve any "public benefit" at all. In making this decision, the IRS cited the fact that there are no bike lanes, the sidewalks are only open to the public during certain times of day, and the "streets" that are allegedly open to the public are blocked by a security gate.

3. As a result of the IRS determination, the IRS is instructing the HOA to go back and re-file their tax returns for a number of years, using the standard form for a corporation rather than the Form 990 for a tax-exempt organization.

If there is no money in the HOA accounts, the HOA will have to collect an additional assessment from the owners to pay whatever tax obligation there may be. The officers probably have no exposure here, since any HOA bylaws drafted by a competent professional would certainly include an indemnification provision that would protect the officers in a case like this. In theory the IRS could pursue a criminal case against the officers, but the information in the IRS letter indicates that this isn't the case.

If there's a substantial amount of taxes, interest and penalties here, the HOA might consider taking legal action against their management company, accountant, or legal counsel if the HOA board can make the case that they were given erroneous legal/accounting advice.