Everything you and your board will need to know about the corporate transparency act.
Understanding the Corporate Transparency Act
In 2021 Congress passed the Corporate Transparency Act. This law created a new beneficial ownership reporting system. The Financial Crimes Enforcement Network, or FinCEN for short, is the division that will be accessing and viewing these reports.
According to FinCEN “The mission of the Financial Crimes Enforcement Network is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.”
Beneficial Ownership Information (BOI)
The BOI refers to identifying information about the individuals who directly or indirectly control a company. FinCEN expects all board members to fill out the BOI as the individuals that exercise substantial control over the homeowner’s association (the board). This report is required to be filled out by January 1, 2025. Each person who is on the board will need to provide a list of 4 things to FinCEN:
- Legal name
- Date of birth
- Residential address
- Identification such as a passport or driver’s license.
This information will need to be updated and refiled any time there is a change in the above-mentioned identification requirements. For example, it must be updated any time there is a new board member, or a board member changes their residential address. You have only 30 days from the change to file the new report. If a report is not filed within the 30 days, the beneficiary individuals will face penalties ranging from fines to jail time! You could be subjected to fines of $500 per day past the 30 days and potentially up to $250,000 in fines and/or two years in prison.
The requirement to file this information with FinCen has been met with a great deal of criticism from members of the Community Association Industry. The risk of personal identity information being compromised is of concern and may in fact deter homeowners from volunteering to serve on their Association’s board in the future.
FinCen assures that the required information will be stored in a secure database with no access to the public. This, however, does not mitigate the risk of sharing personal information with all other board members. All beneficial owners will need to be on file in the report, and the report is not complete until everyone has entered their information. The BOI requires all board members to complete the same one form for the association. To do this, the board will have to get together and share their personal information to submit the BOI form.
CAI Fights Back
The Community Association Institute (CAI) is actively appealing the requirement applying to Community Association Boards. CAI sees the requirement as an unnecessary burden that could deter volunteers from serving on their community’s board. CAI states “…community associations should not be subjected to the same reporting requirements as corporations and LLCs because they operate differently and are nonprofit entities governed by homeowners.” On March 1st the federal court ruled the Corporate Transparency Act unconstitutional, however this win was briefly celebrated. On March 11th the federal government ultimately appealed their decision. Since then, CAI has been asking for homeowners to write to their local legislative office to push back, make your voice heard. In June the Board of Trustees for CAI approved filing a lawsuit to exempt and protect community associations from the Corporate Transparency Act. We expect this lawsuit to be filed this summer. In the meantime, it is recommended to comply with the requirements and continue as if the law will not be overturned.
HOA Community Solutions Support
HOA CS understands the burdens the Corporate Transparency Act poses. To mitigate these impacts on board members, we will be offering to assist boards with filing their forms through FinCEN Report. FinCEN Report charges an annual subscription fee to keep your Association’s reports renewed and up to date. We will be using FinCEN Report for all clients that need assistance, as it is a more secure way to file. The FinCEN Report software is an extremely secure encrypted database. Board members will fill in their portion of the form and not see the other board members personal identification information with other board members. FinCEN Report will allow you to make as many amendments as needed to the filing at no additional cost, and it will save time. If you were to file on the government’s website, you would need to gather all board members in the same location to file the online report every time there is a change in board member information.
You can expect HOA Community Solutions to remind you in October of the need to file and the optional FinCen subscription.
For more information please visit:
Corporate Transparency Act’s Impact on Community Associations (youtube.com)
