As a property manager, your plate is already overflowing with responsibilities. The last thing you want is another complex regulation to add to your list. But with the introduction of the Corporate Transparency Act, staying compliant has become a crucial priority for community associations.
In this blog, we’ll break down the Corporate Transparency Act in a way that makes it easier for you to understand what’s required, so you can focus on what you do best—managing your community and providing a great resident experience. Here are the six key things you need to know to ensure your community association stays compliant:
1. What is the Corporate Transparency Act?
In 2021, Congress passed a new federal law known as the Corporate Transparency Act (CTA). This legislation mandates that certain companies disclose the identities of their beneficial owners and provide additional information to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The goal of the CTA is to help law enforcement identify, track, and report suspicious financial activity, specifically to bolster national security by better detecting terrorist financing and money laundering schemes.
2. What are the CTA’s key terms to understand?
To navigate the CTA effectively, it’s important to understand some key terms:
- Beneficial Owners: These are individuals who exert significant control over the association, directly or indirectly, or who hold at least 25% ownership. This includes all board members.
- Company Applicants: This term refers to the individual who creates or registers the company and is responsible for directing or controlling the filing if multiple persons are involved. Community associations registered on or after January 1, 2024, must file information about their company applicants, with a maximum of two per community. These applicants can include third-party reporting companies, the HOA board compliance officer, or the HOA general counsel.
3. In the world of property management, who does the CTA apply to? Who is exempt?
One of the most important things to understand about the CTA is its scope. The Act doesn’t just apply to businesses; incorporated homeowners associations and including planned developments, condominium associations, and cooperatives are also likely considered reporting companies under this law.
Under the CTA, community associations that have an active 501(c) IRS tax exemption are exempt from filing. Additionally, community associations with more than $5 million in annual revenue and 20 or more employees are also exempt from the filing requirements.
4. What are the CTA’s minimum reporting requirements?
If your community is classified as a reporting company, you will need to submit information to FinCEN on an annual basis. At a minimum, the following must be reported:
- Business name.
- Full legal names, current home addresses, birthdates, and identification numbers (state ID, passport, or driver’s license) of the company’s beneficial owners
- If required, full legal names, current home addresses, birthdates, and identification numbers (state ID, passport, or driver’s license) of company applicants
It’s also essential to update FinCEN within 30 days if there are any changes, corrections, or additions to the information filed—such as when a board member moves or is replaced.
5. What are the penalties for non-compliance?
Noncompliance of filing may lead to civil penalties of $500 per day and criminal penalties of up to $10,000, along with the possibility of up to 24 months in prison.
6. What are the CTA’s important deadlines?
Existing Community Associations have until January 1, 2025, to submit their initial reports. For associations formed after January 1, 2024, reports must be filed within 90 calendar days of formation.
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