The Corporate Transparency Act: 6 Essential Insights for Board Members

A significant federal law known as the Corporate Transparency Act (CTA) was enacted in 2021, mandating most corporations, LLCs, and various entities, potentially including condominium and community associations, to register with the Financial Crimes Enforcement Network (FinCEN) under the U.S. Department of the Treasury. This legislation took effect on January 1, 2024.

In a pivotal ruling on March 1, 2024, a U.S. District Court Judge deemed the Corporate Transparency Act unconstitutional following a lawsuit initiated by the National Small Business Association. Consequently, the government was instructed to halt the enforcement of the CTA against the plaintiffs, though this decision is expected to face appeals and remain embroiled in the federal court system for some time.

The implications of this ruling for businesses not affiliated with the National Small Business Association remain uncertain, but it does underscore issues with the CTA’s stipulations.

If the CTA does get applied to condominium and homeowners associations, here are six key considerations for board members:

Understanding the Corporate Transparency Act

Introduced to bolster anti-money laundering laws, the Corporate Transparency Act aims to combat terrorist financing, corruption, tax fraud, and other illegal activities. Its reach includes associations, which are required to submit Beneficial Ownership Information (BOI).

Defining Beneficial Ownership Information (BOI)

BOI encompasses several elements:
- The association's name.
- Board members' legal names, birthdates, addresses, and identification numbers from driver's licenses or passports.
- People with significant control over the association's financial reporting must also submit BOI.

Existing Associations

Associations formed or registered before January 1, 2024, have until January 1, 2025, to file their initial BOI report.

New Associations

Entities established between January 1, 2024, and January 1, 2025, have 90 days from receiving notification of their creation or registration to submit their initial report. This timeframe begins from the earlier of either the effective notice of creation or the first public notice of registration.

For those created or registered on or after January 1, 2025, the deadline to file initial BOI reports is 30 days from receiving actual or public notice of effective creation or registration.

Both New and Existing Associations

Changes, updates, or corrections must be made within 30 days of recognizing the change, such as when a board member relocates or is replaced.

Consequences of Non-compliance with BOI Submission

Penalties for not submitting BOI can include civil fines of $500 per day and criminal penalties reaching up to $10,000, in addition to potential imprisonment for up to 24 months.

Submission Process for BOI

The necessary information should be submitted through the Financial Crimes Enforcement Network’s website at www.fincen.gov/boi.

It's advisable to consult your association's legal counsel and CPA to ascertain compliance with the CTA. Regular updates are available on the Financial Crimes Enforcement Network's website: https://www.fincen.gov/boi-faqs#C_10

Our team is dedicated to staying updated on this issue to support our boards effectively as they volunteer to serve their communities.