The Corporate Transparency Act (CTA) is a significant piece of legislation that aims to combat illicit activities such as fraud, money laundering, and the financing of terrorism. Enacted in 2021, the CTA mandates that (almost all) Homeowners Associations (HOAs) and other small businesses disclose information about their beneficial owners. As a board member, it's crucial to understand what the CTA entails and how it affects your responsibilities.

What is the Corporate Transparency Act?

The CTA was introduced to enhance corporate transparency and prevent the misuse of entities for illegal purposes. By requiring entities to report beneficial ownership information (BOI), the act ensures that law enforcement agencies have the necessary data to track and curb illicit activities.

Key Requirements for HOA Board Members:

• Beneficial Owner Definition: A beneficial owner is any individual who directly or indirectly exercises substantial control over the entity or owns or controls at least 25% of the ownership interests. Association board members meet the definition of ‘substantial control’ because they make decisions of a financial nature (and other matters) on behalf of the association.
• Reporting Beneficial Owners: Community associations must file BOI Reports with the Financial Crimes Enforcement Network (FinCEN).
• Compliance Deadline: HOAs formed before 2024 must comply by January 1, 2025. HOAs formed during 2024 have 90 days to comply, and HOAs formed after January 1, 2025, will have 30 days to comply.

Information Required Under the CTA

The CTA specifies the following details that must be reported for each beneficial owner (board member):

• Legal Name: The full legal name of the reporting entity (the association).
• Doing Business As (DBA): Any trade names or DBAs used by the reporting entity.
• Taxpayer Identification Number (TIN): The unique identification number the Internal Revenue Service (IRS) assigned to the association.
• Street Address: The primary residential or business address of the association.
• Board members (Beneficial Owners) must provide their Legal name, date of birth, residential address, and a unique identifier (e.g., unexpired driver’s license or passport, identifying document issued by a U.S. state or jurisdiction)
  

Steps to Achieve Compliance

Coming into compliance with the CTA involves filing the required BOI with FinCEN. This process can vary in complexity:

• Simple Ownership Structures: For HOAs with straightforward ownership, the process might take around 2 hours.
• Complex Ownership Structures: More intricate ownership arrangements can take up to 10 hours to document accurately.
• Filing: While there is no fee for filing BOI Reports in the fincen.gov portal, the process can be time-consuming for board members and may require thorough documentation and verification.

Impact on Individual Board Members

Non-compliance with the CTA can result in severe penalties for individual board members and the HOA itself. These penalties include:

• Fines: Non-compliance can lead to fines exceeding $500 per day until compliance is achieved.
• Severe Penalties: In extreme cases, fines can reach up to $10,000, and individuals can face imprisonment for up to two years.

Conclusion

Understanding and complying with the Corporate Transparency Act is essential for board members. By ensuring accurate and timely reporting of beneficial ownership information, you contribute to your association's transparent and legally compliant operation. While the process may seem daunting, the benefits of compliance far outweigh the risks of non-compliance. Understanding and implementing the CTA requirements will safeguard your community association from legal and financial repercussions. 

Does your board need assistance with CTA compliance? Reach out to the experts at CAMS to learn more about our CTA and BOI services.

About Community Association Management Services

In business since 1991, CAMS is North and South Carolina’s premier community management company. With experienced local managers in each of its nine regions, CAMS provides innovative solutions to the community associations it serves. Additionally, CAMS was featured on Inc. Magazine’s 2022 Inc. 5000 list of the fastest-growing private companies in America. To learn more, visit www.camsmgt.com/choose-cams.