In most states, associations gaining exempt status save only federal income tax.   In some states, gaining exempt status also means that you no longer have to pay state income tax.  Because it costs several thousand dollars to prepare the exemption application, most associations need to have taxable interest income of at least $7,000 to justify the cost of going forward with an exemption application.  Today, that means having at least a $550,000 reserve balance.  That eliminates most small associations.

But, associations in Texas enjoy a unique advantage that does not exist in other states.  That is, Texas associations that receive exempt status under IRC Section 501(c)(4) don't have to pay state sales tax.  This lowers the threshhold for which associations can cost justify the exemption application process.  Assuming a 7% sales tax rate on all goods and services, an association with a budget as low as $30,000 can usually justify the cost of the exemption application, because it will be recovered so quickly by savings of sales tax.