Community Associations and Corporate Transparency Act

The Corporate Transparency Act (the “CTA”) went into effect on January 1, 2024, and was enacted to promote greater transparency regarding corporate entity ownership. This law creates new reporting requirements for certain types of corporate entities, including most HOAs and Condominium Associations (collectively referred to herein as “Community Associations”). This summary will provide an outline of the reporting requirements and penalties under the CTA, specifically as they relate to Community Associations.

Does the CTA Apply to My Community Association?

For most Community Associations, the answer is likely yes. While there are 23 exemptions regarding which entities must report under the CTA, the only one that might apply to a Community Association is if it was formed as a 501(c) under the Internal Revenue Code. Assuming this exemption does not apply to your Community Association, it will be required to report information regarding its beneficial owners to the Financial Crimes Enforcement Network (commonly known as “FinCEN”) by the applicable deadline.

What information must be provided?

Community Associations are required to provide general company information, beneficial owner information, and in some situations, company applicant information. Beneficial owners are any individuals who exercise control over the Community Association. This is presently interpreted as all board members and officers. Community Associations must disclose the full legal name, date of birth, current residential address, and identifying number from a driver’s license, state ID, or passport for each board member and officer in order to meet this reporting requirement.

Community Associations must also report the personal information of anyone who owns or controls 25% or more of the Community Association. This would apply to any developers who still maintain at least 25% ownership or control over the Community Association.

The last thing that Community Associations must report is the personal information of the individual filing the report on behalf of the Community Association.

What are the penalties for noncompliance?

Possible violations include willfully failing to file a report, willfully filing false beneficial ownership or company applicant information, or willfully failing to update or correct previously filed reports. Individuals or Community Associations who willfully violate reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. Individuals may also face criminal penalties of up to two years imprisonment and a fine of up to $10,000. FinCEN has indicated that inadvertent mistakes made in good faith will likely not constitute a violation, but that information must be reported accurately.

When do reports need to be filed?

For Community Associations registered or formed prior to January 1, 2024, beneficial ownership information reports are due by January 1, 2025. Community Associations registered or formed on or after January 1, 2024, will have 90 days after notice of their registration/formation to file their reports. These filings must be made annually. Any time a change is made to the above required information, or a correction is required, a Community Association will have 30 days to report this change/correction. If no such changes take place, however, the Community Association must simply reaffirm the current information on file to fulfill their annual reporting requirement.

As a practical matter, we suggest that all Community Associations designate one individual or property manager to collect and report all of the required information for filing, or to pass the collected information along to our office for filing. And while there are efforts to change or overturn this law as it applies to Community Associations, we recommend that all Community Associations continue to comply with the CTA and all applicable deadlines as they are presently set.

If you have questions about how the Corporate Transparency Act impacts your Community Association, contact the Indiana HOA attorney of McNeelyLaw today.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.