On April 18, 2024, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury issued updated guidance addressing the Corporate Transparency Act (CTA).

The CTA directs FinCEN to establish a nationwide database of beneficial ownership of certain corporations and other legal entities including condominium, homeowner (HOA) and townhome community associations. According to FinCen, the term “reporting companies” encompasses corporations, and since most community associations operate as nonprofit corporations, they are included within the scope of the CTA’s requirements.

FinCEN’s latest guidance addresses a number of frequently asked questions, enhancing previous guidelines that were not part of their earlier FAQs. The update can be found here: https://www.fincen.gov/boi-faqs

Three of the newly issued FAQs address the impact of the Corporate Transparency Act on community associations and board members.

 

Who is a beneficial owner of a reporting company? (Question D.1)

“A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over a reporting company (see Question D.2), or (2) owns or controls at least 25 percent of a reporting company’s ownership interests (see Question D.4). Because beneficial owners must be individuals (i.e., natural persons), trusts, corporations, or other legal entities are not considered to be beneficial owners. However, in specific circumstances, information about an entity may be reported in lieu of information about a beneficial owner (see Question D.12).”

 

Who is the beneficial owner of a homeowners association? (Question D.13)

“A homeowners association (HOA) that meets the reporting company definition and does not qualify for any exemptions must report its beneficial owner(s). A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company.

There may be instances in which no individuals own or control at least 25 percent of the ownership interests of an HOA that is a reporting company. However, FinCEN expects that at least one individual exercises substantial control over each reporting company. Individuals who meet one of the following criteria are considered to exercise substantial control over the HOA:

  • the individual is a senior officer;
  • the individual has authority to appoint or remove certain officers or a majority of directors of the HOA;
  • the individual is an important decision-maker; or
  • the individual has any other form of substantial control over the HOA.”

 

What penalties do individuals face for violating BOI reporting requirements? (Question K.2)

“As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591.

A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.”

 

Legal Resource

Below are two KSN educational resources that address the Federal Corporate Transparency Act:

Board members and property managers are advised to consult with their association’s attorney to start their preparations immediately. Community associations cannot ignore the impact of this new law and will need to demonstrate a sense of urgency to comply the Corporate Transparency Act.

Contact our law firm if you have questions regarding the CTA’s impact to your community association, reporting deadlines, and required board member personal information and documents that must be submitted to the U.S. Department of the Treasury.

KSN can assist in preparing the documentation that complies with the CTA including protocols to promptly learn about any changes to the association’s “beneficial owners” and/or updates to their Personally identifiable information (PII) that must be submitted within the required reporting timeframe.

You can reach KSN by calling 855-537-0500 or visiting our website at www.ksnlaw.com.

Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.

 

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