The 70-604 election is an effective tax planning tool for condo and homeowner associations, if done correctly. It should not be used broadly as a way to fund reserves, even though one might reason that it is easy to simply take the excess of membership income over membership expenses for the year and contribute it to the reserve funds. That would violate the intent of the assessment. Reserve assessments should be separate from operating assessments. The 70-604 election only applies to excess operating income. It allows the association to effectively refund the excess and then turn around and re-assess it as part of the following year's operating assessment.
