The Treasurer signed a contract to apply for federal 501(c)(4) status, a second corporation was created and dissolved, and our state status as a social welfare group was never explained. Members were not told, and even board members have not seen the application.
A social welfare group exists for the general community. To keep that status, our clubhouse, pool and parks would have to be open to the public. That turns the board's job upside down: the people who pay for everything would no longer be the people it serves first.
Every year we would hear how much has to be repaired so the public can keep using our facilities. Meanwhile no one would ask how investing in the clubhouse and our other assets could build their value for the owners who paid for them.
Opening our facilities to everyone means more people, more use and more damage. Things wear out sooner, reserves are spent faster, and assessments go up.
Facilities used only by owners and their guests are generally not covered by Title III of the Americans with Disabilities Act. Facilities open to the public are places of public accommodation, and they can be required to meet its accessibility standards: entrances, restrooms, the pool, parking and more. Those upgrades would be paid by owners.
Every member of the public who uses our facilities is a possible injury claim against the Association. Being open to the public also means higher insurance premiums. Owners would pay for both.
Private amenities are part of what buyers pay for in Pine Mountain Club. Losing exclusive use of the clubhouse, pool and parks can lower the value of every home here.
The Association can fine members, but it has little hold over outsiders. Guest limits or members-only hours could themselves put the exemption at risk.
Opening our facilities invites outsiders into the community. That can mean more vandalism and theft, and higher patrol costs.
Owners would pay for all of it through their assessments, and get less of the use they paid for.
After six months of requests, the general ledger, the 2024–2025 records and the front and back images of the checks have not been produced, and I have been stopped from inspecting the books at the office.
The Treasurer alone signed a $9,500 contract to change our tax status. A second corporation was created and dissolved, and the Association\'s lawyer says there are no board minutes or resolutions about it.
I was expelled from a board meeting and escorted out by Patrol after asking one question about our tax status.
The board is supposed to publish the Association's financial numbers to members. Members have to fight for every record.
The Articles say recreational functions are "for its members," and CC&Rs § 2.3 gives members, their guests and the Association's invitees the exclusive right to use Association property. A 501(c)(4) requires public access. Changing that needs the approval of at least 55% of members (CC&Rs § 7.4), and no vote has been held.
Directors must act in good faith and with reasonable care. Keeping the full board and the members in the dark falls short of that.
Each point is based on the records and events described on this page.
The biggest problem is not one number or one form. It is that members, and even directors, learn about major decisions only after they have happened.
Our governing documents make the Association a private association for its members. The Articles say its recreational functions are "for its members," and CC&Rs § 2.3 gives members, their guests and the Association's invitees the exclusive right to use Association property. If the board wants us to become something else, such as a social welfare group, the proper way is to propose amending those documents and get the approval of at least 55% of members (CC&Rs § 7.4). That has not happened.
In my view, the Gates run the Association as if it were their own private corporation above the law. Decisions are made within a voting majority and kept between them, without checking with the other directors or with the members.
Members voted for Randall Gates and Nichole Gates expecting transparency. What members got instead is a board that acts as if it is above the law. In my view, it is the least transparent board in the history of Pine Mountain Club.
In my view, this is a complete disregard for the law, for the Davis-Stirling statutes and for our own governing documents. Article 8 of our Bylaws, as I read it, requires the board to publish the Association's financial numbers to members. Instead, members have to fight for every record, and even directors are left without the information.
We learned from the Franchise Tax Board, not from the Association, that we are listed as exempt under 23701(f), the state status for social welfare groups. The Franchise Tax Board gives the exemption date as August 1, 1980. Members have never been told what status the Association holds, and the board is now going further by seeking the federal version.
On February 24, 2026, Treasurer Randall Gates signed a tax services agreement with Porter & Lasiewicz CPAs. The firm is to prepare the Association's federal 501(c)(4) exemption application (Form 1024-A) and amend prior years' tax returns for a fixed fee of $9,500, plus $2,500 for a Form 990. He is the only person who signed for the Association. Board members have not been given the application and have no information about what it says. Members do not know whether it has been sent.
Porter & Lasiewicz CPAs prepares these applications as part of its business. Its proposal says it has prepared about 100 of them for other associations, and it urges the Association to pursue exempt status "if at all possible." The same proposal says that for some associations the payoff is not in tax saved. The advice to apply comes from the firm that is paid to apply.
We found out overnight that a separate corporation, "Pine Mountain Club POA," had been created and later dissolved. Members were never told. The Association's lawyer says it came from an inadvertent filing in 2025 while the agent for service of process was being updated, and that there are no board minutes or resolutions about it because it was not the subject of board action. It existed for about eight months. The Franchise Tax Board still shows it as active, which can mean its tax filings were never closed out. We do not know whether it owes taxes or penalties, or who would pay them.
After six months of written requests, the records still have not arrived: the general ledger, the 2024–2025 financial records and bank statements, the front and back images of the checks, and the IRS examination findings. On September 18, 2026, the Association's lawyer wrote that the 2024–2025 and 2025–2026 records were still being digitized and redacted. They still have not been produced. Each missing record is one more decision members cannot check.
Both labels mean the Association pays little or no tax. They are written for very different organizations.
| Homeowners association 23701(t) · federal 1120-H | Social welfare group 23701(f) · federal 501(c)(4) | |
|---|---|---|
| Who it serves | The owners who pay the assessments | The general community |
| Clubhouse, pool, parks | Can be for members only | Must be open to the general public for federal 501(c)(4) status (IRS Revenue Ruling 74-99) |
| Federal return | Form 1120-H | Form 990, open to the public |
| Risk of losing it | Low, if it runs as an HOA | Denied or revoked when facilities are members-only |
A tax label does not take away members' rights. Those come from the Davis-Stirling Act, the Nonprofit Mutual Benefit Corporation Law, and our CC&Rs and Bylaws.
Section 23701(f) covers organizations described in federal 501(c)(4), so the federal rules matter here too. To qualify federally, a homeowners association's common areas must be open to the general public, not just owners. The IRS applies this strictly. It has denied associations whose clubhouse, lake and pool were members-only, and one that closed its common areas to outsiders over liability concerns (December 2025). It denied a gated association again in July 2026.
Approval is not the end of it. In December 2024 the IRS revoked a gated association's 501(c)(4) status because its services benefited only the people inside the gates. After revocation it had to file regular income tax returns. If that happened here, members would pay any back taxes, penalties and fees through assessments.
An ordinary HOA return already leaves assessments untaxed when they are spent on Association purposes. What 501(c)(4) status mainly saves is tax on interest and outside income. Members have not been shown what that saving would be. Porter's own proposal says that for some associations the payoff is not in tax saved.
A 501(c)(4) may not operate mainly for the private benefit of its members. Member discounts, members-only events or any favoring of owners could put the exemption at risk. That is the opposite of what a homeowners association is for, which shows this status cannot really fit us.
A 501(c)(4) must file a Form 990 every year, with preparer fees. Late returns carry daily penalties, and the IRS automatically revokes the status of any organization that does not file for three years in a row.
Money from renting the clubhouse to outsiders, food service and similar activities can still be taxed as unrelated business income.
Our Articles and CC&Rs describe a private corporation for its members. Running the Association as a public-serving group without amending them invites lawsuits from members, and the Association pays the legal costs of both sides.
The Association would have to follow both the Davis-Stirling Act, which protects owners, and federal exempt-organization rules, which require serving the public.
A 501(c)(4) is allowed to lobby, so the board could spend Association money on advocacy. Civil Code 5135 still bars using Association funds in our own election campaigns.
Two arguments will come up. A 501(c)(4) files a public Form 990, which shows officer pay and the Association's finances. And the status saves tax on interest income. Neither one requires giving up our private, members-first Association. The board can already open our books to members under the Davis-Stirling Act, and no one has shown members how much tax would actually be saved.
This could be a filing mistake. It could also mean the Association applied for this status on purpose. Members have not been told which. We do not know:
When I asked this question at a board meeting, I was expelled and escorted out by Patrol. It is a fair question, and members deserve an answer.