# ASC 740-972: Income Taxes — Real Estate—Common Interest Realty Associations

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/740/972/)

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## ASC 740-972: Income Taxes — Real Estate—Common Interest Realty Associations

### Machine-generated study aids

```json
{
  "summary": "This Subtopic applies Topic 740's income tax guidance to common interest realty associations (CIRAs), such as homeowners' and condominium associations. Because a CIRA's income taxes generally do not relate to an excess of revenues over expenses, the tax provision may be presented among other operating expenses in the statement of revenues and expenses rather than as a separate below-the-line item. It also imposes CIRA-specific note disclosures about filing status, tax liability, and expiring credits.",
  "key_points": [
    "The Subtopic addresses income tax presentation and disclosure issues for common interest realty associations (740-972-05-1) and uses the scope of Section 972-10-15 (740-972-15-1).",
    "Because income taxes are generally not related to the excess of revenues over expenses as in commercial entities, they may be presented in the same manner as other operating expenses in the statement of revenue and expenses (740-972-45-1).",
    "Notwithstanding that presentation option, common interest realty associations shall follow the guidance in Topic 740 for accounting for income taxes (740-972-45-1).",
    "In addition to disclosures GAAP requires of other entities, the notes must disclose the association's income tax filing status and its liability for income taxes (740-972-50-1(a)).",
    "The notes must also disclose credits from taxing authorities that will be phased out in future reporting periods (740-972-50-1(b))."
  ],
  "categories": [
    "Income taxes",
    "Presentation",
    "Disclosure",
    "Industry-specific"
  ],
  "audience_level": "intermediate",
  "student_note": "The exam trap here is assuming every entity must present income tax expense as a separate caption below operating results — CIRAs may present it as an operating expense, but they still measure and account for taxes under Topic 740. Also remember CIRAs have an election-driven filing status (e.g., which return they file), which is why disclosure of filing status and tax liability is mandated.",
  "related_topics": [
    "740",
    "740-10",
    "972",
    "972-10",
    "972-235"
  ],
  "key_concepts": [
    "common interest realty association",
    "income tax filing status",
    "statement of revenues and expenses",
    "operating expense presentation",
    "phased-out tax credits",
    "income tax disclosures"
  ]
}
```

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## ASC 740-972-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/740/972/#05-overview-and-background)

SEC content: no

##### [740-972-05-1](https://asc.understandingaccounting.org/asc/740/972/#740-972-05-1)

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This Subtopic addresses income tax disclosure issues for [common interest realty associations](https://asc.understandingaccounting.org/glossary/c/#common-interest-realty-association "An association, also known as a community association, responsible for the governance of the common interest community, for which it was established to serve. A common interest realty association is generally funded by its members via periodic assessments by the common interest realty association so that it can perform its duties, which include management services and maintenance, repair, and replacement of the common property, among other duties established in the governing documents and by state statute.").

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## ASC 740-972-15: 15 Scope and Scope Exceptions

[Read section](https://asc.understandingaccounting.org/asc/740/972/#15-scope-and-scope-exceptions)

SEC content: no

#### Overall Guidance

##### [740-972-15-1](https://asc.understandingaccounting.org/asc/740/972/#740-972-15-1)

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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 972-10-15.

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## ASC 740-972-45: 45 Other Presentation Matters

[Read section](https://asc.understandingaccounting.org/asc/740/972/#45-other-presentation-matters)

SEC content: no

##### [740-972-45-1](https://asc.understandingaccounting.org/asc/740/972/#740-972-45-1)

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Because income taxes are generally not related to the excess of revenues over expenses as in commercial entities, they may be presented in the same manner as other operating expenses in the statement of revenue and expenses. [Common interest realty associations](https://asc.understandingaccounting.org/glossary/c/#common-interest-realty-association "An association, also known as a community association, responsible for the governance of the common interest community, for which it was established to serve. A common interest realty association is generally funded by its members via periodic assessments by the common interest realty association so that it can perform its duties, which include management services and maintenance, repair, and replacement of the common property, among other duties established in the governing documents and by state statute.") shall follow the guidance in Topic 740.

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## ASC 740-972-50: 50 Disclosure

[Read section](https://asc.understandingaccounting.org/asc/740/972/#50-disclosure)

SEC content: no

##### [740-972-50-1](https://asc.understandingaccounting.org/asc/740/972/#740-972-50-1)

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In addition to disclosures required by generally accepted accounting principles (GAAP) for other entities, the notes to a common interest realty association's financial statements shall include disclosures about both of the following:

1.  a
    
    The common interest realty association's income tax filing status and its liability for income taxes
    
2.  b
    
    Credits from taxing authorities that will be phased out in future reporting periods.