Corporate Transparency Act (CTA)
The Corporate Transparency Act (CTA) of 2020 is part of the National Defense Authorization Act (NDAA) HR 6395 ratified on January 1, 2021 (see Sec. 1261). The stated purpose of the law is to combat money laundering and the concealment of illicit money through shell companies in the United States. Put simply, the CTA requires community associations to report information: 1) initially and then 2) within 30 days of changes in beneficial ownership information (BOI).
This FinCEN webpage about beneficial ownership information reporting includes several helpful links and this YouTube video with an invigorating soundtrack. Community associations (YES: your association IS a business!) must meet the reporting requirements established by FinCEN beginning January 1, 2024.
Community association volunteer Board members (directors) are beneficial owners because they exercise "substantial control” by directing, determining, or having substantial influence over important decisions made by the reporting company. These include, for example, ‘‘major expenditures or investments’’ and ‘‘the selection or termination of business lines or ventures’’ of the reporting company, among other things. Reference 31 CFR 1010.380(d)(1). View the FinCEN Twitter (X) feed.
February 14, 2024: FinCEN Director Testimony to Congress
"I want to clearly state that FinCEN has no interest in hitting small businesses with excessive fines or penalties. The CTA penalizes willful violations of the law, and we are not seeking to take “gotcha” enforcement actions."
JANUARY 1, 2025 COUNTDOWN CLOCK
Your association is required to comply UNLESS:
registered as a 501(c) corporation (some HOAs hold 501(c)(4) status | View Why Your Association is NOT a 501(c)(3) -OR-
has 20 or more employees AND reports over $5,000,000 in gross revenue to the IRS
From the FinCEN final rule for beneficial ownership support news release page:
The rule is effective January 1, 2024
Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports
Reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports
Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their BOI
Business Name and Trade Name(s) and/or DBAs
Business Address
Formation Jurisdiction
IRS Taxpayer ID
Name
Birthdate
Address
A unique government-issued identifier (passport, driver’s license, etc.)
PENALTIES for Failure to Report Beneficial Ownership Information (BOI)
FinCEN is issuing this Guide and other guidance, as well as conducting outreach, to ensure that all reporting companies are aware of their reporting obligations, including their obligations to update or correct beneficial ownership information. If a person has reason to believe that a report filed with FinCEN contains inaccurate information and voluntarily submits a report correcting the information within 90 days of the deadline for the original report, then the Corporate Transparency Act creates a safe harbor from penalty. However, should a person willfully fail to report complete or updated beneficial ownership information to FinCEN as required under the Reporting Rule, FinCEN will determine the appropriate enforcement response in consideration of its published enforcement factors.
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.
Providing false or fraudulent beneficial ownership information could include providing false identifying information about an individual identified in a BOI report, such as by providing a copy of a fraudulent identifying document.
Additionally, a person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI report or to report incomplete or false beneficial ownership information to FinCEN.
For example, an individual who qualifies as a beneficial owner or a company applicant might refuse to provide information, knowing that a company would not be able to provide complete beneficial ownership information to FinCEN without it. Also, an individual might provide false information to a company, knowing that information is meant to be reported to FinCEN.
