The Corporate Transparency Act: 6 things board members need to know

In 2021, a federal law called the Corporate Transparency Act (CTA) was passed by Congress, requiring most corporations, LLCs, and other entities, likely including condominium and community associations, to register with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. The CTA became effective on January 1, 2024.

Although there are mixed opinions about whether the CTA applies to condo and HOAs, FirstService Residential is proactively assisting board members serving condo and HOAs in understanding and navigating this act.

On March 1, 2024, U.S. District Court Judge Liles C. Burke wrote an opinion in which he declared the Corporate Transparency Act (CTA) to be unconstitutional, after a lawsuit was brought by the National Small Business Association. The court then directed the government to stop enforcement of the CTA against the plaintiffs. It is expected that this ruling will be appealed and this issue will be tied up in the federal court system for a while.  
 
At this time, it is unclear what effect, if any, that this ruling will have on businesses that are not members of the National Small Business Association. However, it does highlight issues with the CTA’s requirements.

If the CTA is ultimately determined to apply to condo and HOAs, here are 6 things a board should keep in mind:

1. What is the Corporate Transparency Act?

   Congress enacted the Corporate Transparency Act in 2021 to expand anti-money laundering laws to combat terrorist financing, corruption, tax fraud, and other illicit activities. Its scope extends to associations, which must submit Beneficial Ownership Information (BOI).
    

2. What is Beneficial Ownership Information (BOI)?

   BOI includes:
    
   • The name of the association.
      
   • Board members' legal names, birthdates, addresses, and driver's licenses or passport numbers.
      
   • BOI must also be submitted by anyone with substantial control over the association's financial reporting.



3. When is the deadline to submit this information?

   Existing Associations
   
   Associations created or registered to do business before January 1, 2024, will have until January 1, 2025, to file their initial Beneficial Ownership Information (BOI) report.
   
   New Associations
   
   Associations formed on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the associations’ creation or registration to complete the initial report. This 90-calendar day deadline runs from when the associations receive notice that their creation or registration is effective or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
   
   Associations created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice of their creation or registration is effective to file their initial BOI reports.
   
   Both New and Existing Associations
   
   Any changes, corrections, and additions to the filing (i.e., a board member moves, is replaced, etc.) must occur within 30 days of becoming aware of the change.
    

4. Are there consequences for failing to submit Beneficial Ownership Information (BOI)?

   Failure to submit can result in civil penalties of $500 per day and criminal penalties of up to $10,000 as well as up to 24 months in prison.
    

5. Where should Beneficial Ownership Information (BOI) be submitted?

   Required information can be submitted via the Financial Crimes Enforcement Network (FinCEN) website at: www.fincen.gov/boi
    

6. What is FirstService Residential doing?

   FirstService Residential is diligently working with association counsels and others to understand the potential impact the CTA may have on board members and the work they do for associations.
   
   We agree with the Community Association Institute’s (CAI) assertion that the CTA should not apply to community associations. FirstService Residential supports CAI’s current efforts, which include:
    
   • Requesting community associations be exempt from the act and the subsequent Beneficial Ownership Information (BOI) reporting requirements.
      
   • Requesting a delay in implementing the Beneficial Ownership Information (BOI) reporting requirements by supporting H.R. 4035/S. 2623 and H.R. 5119.
      
   • Urging confidentiality of the individual corporate filings of the Beneficial Ownership Information (BOI) reporting through the rulemaking process.
      
   • CAI is urging board members and industry professionals to reach out to their Senators and request them to postpone the enforcement of the Corporate Transparency Act, as well as explain if community associations are subject to CTA reporting requirements.

Please consult your Association’s legal counsel and CPA to determine whether your Association is required to comply with the CTA. You can also consult the website of the Financial Crimes Enforcement Network for updates on this topic: https://www.fincen.gov/boi-faqs#C_10

Our team will continue to monitor this conversation for our industry with the goal of supporting our boards in their important work as volunteers serving the interests of their communities.