Being a member of a condominium or homeowners’ association board of directors has its challenges. One of those challenges is keeping up with new information related to community associations and board responsibilities on the state and federal levels. This blog covers new federal reporting requirements for both condominium and homeowners’ association board members.

The Corporate Transparency Act (“CTA”) was enacted in 2021 to address criminal activities related to U.S. Corporations, such as tax fraud, terrorism, and money laundering. As a part of the CTA, the Financial Crimes Enforcement Network (“FinCEN”), formed by the U.S. Department of Treasury, enacted a rule requiring “beneficial owners” of a corporation or other business entity to report certain information to FinCEN and to keep that information updated upon any changes in the information provided.

The CTA applies to most business entities created through a filing with a secretary of state or a similar agency.  There are some exceptions to this reporting requirement, but most community associations will not fall under the exceptions and will be required to report. The directors and officers of the association will also be required to report as explained below.

A “beneficial owner” is defined as an individual who, directly or indirectly, meets one of the following requirements: a) exercises substantial control over the entity, or b) owns or controls not less than 25% of the ownership interests of the entity. This is a very broad definition, but, under this definition, directors and officers of associations constitute those who “exercise substantial control over the entity”.

The good news is the reporting requirements are rather easy to fulfill. The association must report by providing the legal name of the association, the trade name (if any), the address of the association’s principal office or registered agent, the tax identification number, and the state in which the association is formed. The beneficial owners (board members and officers) must provide their legal names, date of birth, mailing address, and a photocopy of one of the following: a) a valid driver’s license, b) a valid (unexpired) passport, or c) current state identification. This information must be updated within 30 days of any change to the information. For example, after the annual election, new board members will need to report, and old board members will no longer be required to report. If the association changes its registered agent, that information will need to be reported within 30 days of making the change.

Associations in existence as of January 1, 2024, and their beneficial owners, have until January 1, 2025, to report the required information. Any association formed after January 1, 2024, must report within 30 days of when the association is formed (this could be extended to 90 days but as of now this has not been confirmed).  Failure to report could result in fines up to $500 per day and if any entity or beneficial owner intentionally provides inaccurate information or commits fraud, that fine can be up to $250,000.00.

Community Associations Institute (CAI), through its national office in Virginia, is working with Congress to remove the requirement that board members report to FinCEN and requesting that, at the very least, the reporting deadline be delayed if Congress will not exempt all community associations from the reporting requirement for CTA. At this time, Congress has not decided on either request. There may be changes in the reporting requirements, so our firm will keep you up to date on any new information as changes develop.

If you have questions about CTA and the reporting requirements, please call (614) 228-0207 and speak with one of our attorneys.