In 2024, Homeowners Associations (HOAs) and Condominium Owners Associations (COAs) face a new federal requirement: the Corporate Transparency Act (CTA). Designed to combat illicit financial activities, the CTA will impact many associations, and as community managers, you play a key role in ensuring compliance. By understanding the Act and preparing your associations for the upcoming changes, you can help avoid unnecessary complications and penalties.
Let’s break down what you need to know about the CTA, why it matters to your association, and the actionable steps you should take to stay ahead of this new regulation.
What is the Corporate Transparency Act?
The Corporate Transparency Act is a federal regulation passed in 2021, requiring specific entities, including many HOAs and COAs, to file beneficial ownership information (BOI) with the Financial Crimes Enforcement Network (FinCEN). The Act aims to curb illegal activities such as money laundering and terrorist financing by requiring greater transparency in company ownership structures.
Even though HOAs and COAs are often nonprofit corporations, they fall under the Act’s definition of “reporting companies” and are required to file unless they meet specific exemptions. This means that as a community manager, it’s your job to guide your association through the new requirements and help them file correctly.
Why Does This Matter for Your HOA or COA?
You might be thinking, “We’re just a community association; why does this apply to us?” Here’s the key: many HOAs and COAs are set up as nonprofit corporations or LLCs, which now places them squarely within the CTA’s scope. Failure to comply with these new rules can result in serious penalties, including hefty fines and potential criminal charges.
The good news? You have until January 1, 2025, to file if your HOA or COA was created before 2024. If your association is newly formed after January 1, 2024, you’ll need to file within 30 days of formation. By preparing now, you can ensure a smooth compliance process.
What Information Do You Need to File?
The CTA requires the association to disclose information about its “beneficial owners.” In most HOAs and COAs, beneficial owners typically include board members, officers, or individuals who own or control 25% or more of the association. The information you’ll need to provide for each beneficial owner includes:
- Full Legal Name
- Date of Birth
- Current Residential or Business Address
- Unique Identifying Number from an acceptable identification document (like a driver’s license or passport)
This data will be submitted to FinCEN through an online reporting system that they will keep confidential—only accessible to certain federal agencies and law enforcement officials.
Steps for Community Managers: Getting Your HOA/COA Ready for the CTA
Now that you know what’s coming, let’s focus on how to prepare. Here’s a step-by-step checklist to help you manage the new CTA filing requirements:
1. Determine if Your Association is a “Reporting Company”
Most HOAs and COAs will need to file under the CTA, but there are some exemptions (such as associations with more than 20 full-time employees, over $5 million in annual revenue, and a physical office in the U.S.). Review the exemption criteria with your board to determine your association’s status.
2. Identify the Beneficial Owners
Next, review your association’s governing documents to identify the individuals who meet the beneficial owner criteria. This typically includes board members, officers, or any individual who directly or indirectly owns or controls 25% or more of the association.
3. Gather Required Information
Collect all necessary information about each beneficial owner. This can be a bit tedious, but it’s essential to gather accurate and up-to-date information to avoid errors when filing. Create a secure digital file to keep track of names, addresses, birth dates, and identification numbers.
4. Create a Filing Timeline
If your association was formed before January 1, 2024, you have until January 1, 2025, to file. However, starting the process early will give you time to double-check details and address any issues that arise. For newly formed associations, mark the 30-day filing window on your calendar to ensure timely compliance.
5. Educate Your Board Members
This is an important step! Board members need to understand what the CTA is, why it matters, and what information will be submitted. Clear communication can help ease any concerns about data privacy, especially since beneficial ownership information will be confidential and protected by FinCEN.
6. Consult Legal Counsel
Consider seeking advice from legal professionals experienced in community association law to help navigate the CTA’s requirements. They can clarify any gray areas and ensure that your association’s filing meets all compliance standards.
7. Set Up a System for Ongoing Updates
Once your initial filing is complete, remember that changes in beneficial ownership (such as new board members) must be updated with FinCEN within 30 days. Establish a procedure for regular reviews and updates to keep your association’s information current.
Addressing Common Concerns
You may hear board members express concerns about data privacy. Assure them that the information filed with FinCEN is not public and is strictly protected, with access limited to certain federal agencies and law enforcement. Also, while this process may seem daunting, think of it as a way to reinforce the association’s integrity and compliance, which is beneficial for the entire community.
Final Thoughts
The CTA is one of those federal requirements that might seem like just another item on your to-do list, but by addressing it now, you can avoid the risk of non-compliance down the line. As a community manager, your proactive approach and guidance will ensure that your HOA or COA meets these new obligations smoothly and confidently.
By staying informed, educating your board, and taking the necessary steps to file accurately and on time, you’re setting your association up for success in 2025 and beyond.
Sources:
- FinCEN – Corporate Transparency Act Overview
