My question involves business law in the state of: California
I'm a board member of a HOA where a social committee of HOA homeowners have formed a separate legal entity for the the purpose of generating revenue (selling advertising) to fund HOA social events. If this same social committee was under the direction of the board as an appointed committee, the HOA would have to pay taxes on the advertising revenue received and would be subject to the tax-exempt thresholds specified in IRC 528. However, since the social committee is now a separate legal entity, most board members feel the HOA has no tax liability concerns. To me, this falls under the category of: 'it's too good to be true." Am I too suspicious or are there legitimate tax liability issues that have to be addressed?