COMPLIANCE WITH THE CORPORATE TRANSPARENCY ACT

The Corporate Transparency Act (“Act”) was enacted in 2021 to combat suspicious activity, money laundering, fraud, and terrorist financing. The Act requires all corporations and LLCs without an IRS 501(c) tax-exempt designation that have less than five million dollars in gross receipts and fewer than twenty full-time employees to disclose personal information of the company’s “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury.

Federal law has defined a beneficial owner as “an individual who has a level of control over, or entitlement to, the funds or assets of a corporation or limited liability company that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the corporation or limited liability company.” It seems clear that this definition applies to community associations, and so far, no exemption has been established. Therefore, associations with less than five million dollars in gross receipts or sales and less than twenty employees, who do not fall under any of the other exemptions listed in the Act, must file with FinCEN no later than January 1, 2025.

Boards are required to identify all individuals who exercise substantial control over the association. A person exercises substantial control if they meet any of four general criteria: (1) the individual is a senior officer of the association; (2) the individual has the authority to appoint or remove certain officers or a majority of directors of the association; (3) the person is an important decision-maker; or (4) the person maintains any substantial control over the association. An association’s board of directors meets the above requirements, and therefore all board members should file the following beneficial owner information with FinCEN:

• The legal business name of the association;
• The name, address, and birthdate of each director of the association; and
• A copy of the State issued driver’s license or U.S. passport for each director of the association.

This information can be filed via the FinCEN website: https://boiefiling.fincen.gov

This law is being challenged on behalf of community associations in several venues, but for now it remains in effect. The penalties for non-compliance are civil fines of $500.00 per day, up to $10,000.00, and a possible two years in prison. For now, association boards should work with their managers and legal counsel to ensure that they meet the January 1, 2025, filing deadline.

Please don’t hesitate to contact us if you have any questions.