Is Your HOA Board Ready for the CTA (Corporate Transparency Act)?
Not sure what the CTA (Corporate Transparency Act) is? Then read on, because community associations may have to comply with it and file the required information by the start of 2025.
While there is still a chance that legal intervention will make community associations exempt from the CTA, associations—and each of their board members—should start preparing now since exemption is not guaranteed.
What do you need to do?
The first step is to plan how the association and board members will comply with the CTA by the deadline of January 1, 2025. Of course, board members and the community management team can file the initial report themselves. However, it might be a better option to work with your property management company. Denali Property Management, for example, is partnering with experts in order to offer their assistance to clients. There might be a couple of options available to you, so the important thing is to decide what your plan is now. Check with your property manager for recommendations.
What is required for compliance?
The best way to understand how to comply with the CTA is to keep in mind that its primary goal, like its name suggests, is to enhance transparency in corporate ownership. It is designed to help combat financial crimes and address vulnerabilities in the U.S. financial system.
Most community associations will be required to comply with the CTA because they are corporate entities; association board members will have to report as well since they have “substantial control” over the association and its finances. The CTA requires that “beneficial owners” (in the case of an association, the board members) be identified by reporting “Beneficial Owner Information,” or BOI. This information needs to be reported to the Financial Crimes Enforcement Network (often called“FinCEN”) which is part of the Treasury Department.
The association must report its full legal name, any trade names, street address of its principal place of business, the state in which it was formed, and its EIN. It must also report the following about each board member: either a FinCEN identifier, or a name, birthdate, residential address, and an identifying number from a non-expired driver’s license or passport, along with an image of the referenced document. If there are any changes to this information, it needs to be reported to FinCEN within 30 days.
Are There More Details?
Keep in mind that associations formed before January 1, 2024 must file their initial report no later than January 1, 2025. That’s sooner than it seems, so make plans with your property manager now. Since violations of the CTA may result in fines, penalties and imprisonment for the association and its board, you’ll want the help of an expert to ensure you are in compliance.