The Corporate Transparency Act (CTA) has introduced a new set of requirements for many entities, including homeowners associations (HOAs).
This legislation, designed to combat financial crimes like money laundering, mandates increased reporting and transparency.
For clients who are part of an HOA, understanding these obligations can help them stay compliant with federal law.
What is the Corporate Transparency Act?
The CTA is a federal law aimed at uncovering the real people behind entities like corporations, limited liability companies, and other similar structures.
By requiring detailed reports on ownership and control, the law seeks to prevent the misuse of these entities for illegal activities.
While HOAs are generally not profit-driven organizations, they may still fall under the umbrella of the CTA if they meet certain criteria.
Do All HOA Need to Register?
Not all HOAs will need to register under the CTA.
The law applies to “reporting companies,” which generally include corporations, LLCs, and other entities created by filing a document with a state.
An HOA that is incorporated as a nonprofit or another legal entity, likely qualifies as a reporting company.
There are some exemptions, but most HOAs won’t meet the thresholds for those exceptions. For example, large companies with over 20 employees and significant revenue are exempt, but this is unlikely to apply to a typical HOA.
What Information Must Be Reported?
For HOAs required to comply, the CTA requires the submission of a Beneficial Ownership Information (BOI) report to the Financial Crimes Enforcement Network (FinCEN). This report must include:
- Names, addresses, and birthdates of beneficial owners: These are individuals who exercise control over the HOA or own a significant interest in it.
- Identification details: A copy of a government-issued ID for each beneficial owner.
HOAs should designate a responsible party to compile and submit this information accurately.
Deadlines and Compliance
The timeline for compliance depends on when an HOA was formed:
- Existing HOAs: Must file their BOI reports by January 1, 2025.
- Newly formed HOAs: Have 30 days from the date of formation to submit the required information.
Failing to meet these deadlines could result in penalties, including fines.
What This Means for HOA Members
As a member of an HOA, your clients might be wondering how the Corporate Transparency Act (CTA) affects them.
While the reporting requirements are the responsibility of the HOA’s board or management, they may impact how your client’s HOA operates. For instance:
- Increased Accountability: The CTA ensures that the people managing HOAs are operating transparently, which can build trust among members.
- Potential Fees or Assessments: Preparing and filing the required reports might involve legal or administrative costs, which could be passed on to members through annual fees or assessments.
- Board Member Obligations: If your client is on the board, they may need to provide personal information or assist in gathering the necessary details for filing.
If your clients have questions about how their HOA is handling these new obligations, consider reaching out to your board or property management company for updates, as well as a real estate attorney.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property owners. For more information, schedule a consultation today.
