With the goal of battling money laundering, Congress passed the Corporate Transparency Act in 2021. This federal law requires many LLCs, corporations and other entities to register with the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury. In force as of January 1, 2024, the CTA includes homeowner associations and condominium associations.

The impact of the CTA on HOAs and condo associations is still unclear. Regardless, FirstService Residential is proactively assisting board members serving HOAs and condos in understanding and navigating this act.

The National Small Business Administration (NSBA) sued the federal government over the act.  U.S. District Court Judge Liles C. Burke wrote a summary judgment declaring the CTA unconstitutional on March 1. That opinion, which states that the law exceeds Congress’ enumerated powers, ordered the government to cease enforcing the CTA against the plaintiffs.

The summary judgment only applies to members of the NSBA and FinCEN has said they expect other businesses to remain in compliance with the new law, pending appeals. This issue will remain in federal court for some time.  

The Court did not issue a nationwide injunction, so much remains unclear. The ruling does, however, highlight issues with the CTA's requirements. As of March 12, the US Department of Justice filed an appeal of the decision. Boards should know the following 6 things if it's decided the CTA ultimately applies to HOAs and condos:

1. What is the Corporate Transparency Act? 

The Corporate Transparency Act was created and enacted to combat corruption, tax fraud, financing of terrorism and other illicit activities. Congress included homeowner and condo associations in the scope of the CTA and required that all board members of those associations must submit Beneficial Ownership Information.

2. What is Beneficial Ownership Information (BOI)?

BOI includes:

  • The full legal name of the association.

  • Board members' full legal names, dates of birth, driver's licenses or passport numbers and full addresses.

  • Anyone with substantial control over the association's financial reporting must submit BOI.

3. When must the information be submitted to the Treasury Department?

Existing Associations

If the association was created or registered to do business before January, 2024, the Beneficial Ownership Information (BOI) reports must be filed with the U.S. Department of the Treasury by January 1, 2025.

New Associations

Associations formed on or after January 1, 2024, and before January 1, 2025, must complete their initial report within 90 calendar days after receiving notice of the associations’ creation or registration. This 90-calendar day clock starts 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

In the event of changes like a board member moving or being added/replaced, the association must make updates to the BOI filing within 30 days of learning of the change.

4. What happens if a board fails to submit BOI?  

Board members may be subject to civil fines of $500 per day, criminal fines of up to $10,000 and up to 24 months in prison for failing to submit BOI.

5. How should boards submit their BOI? 

Board members can submit the required BOI information via the Financial Crimes Enforcement Network (FinCEN) website at: www.fincen.gov/boi

6. How is FirstService Residential responding to the CTA?

FirstService Residential is working diligently with association attorneys and others to understand the potential impact the CTA may have on association board members and their roles managing associations.

A bipartisan coalition of more than 80 senators and representatives has sent a letter to FinCEN to advocate for a one-year postponement of all reporting obligations. We are in agreement with the Community Association Institute (CAI) statement that the CTA should not apply to community associations. We support CAI’s current efforts, including:

  • Urging confidentiality of the individual corporate filings of the Beneficial Ownership Information (BOI) reporting through the rulemaking process.

  • Requesting a delay in implementing the Beneficial Ownership Information (BOI) reporting requirements by supporting H.R. 4035/S. 2623 and H.R. 5119.

  • 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 and explain if community associations are subject to CTA reporting requirements.

  • Requesting community associations be exempt from the act and the subsequent Beneficial Ownership Information (BOI) reporting requirements.

FirstService Residential’s dedicated teams will continue to monitor the developing situation and support our board members as they diligently serve their communities and send out information as we can.

Please consult your association’s attorney and CPA to determine whether your association must comply with the CTA.

Monday April 08, 2024