On Friday, March 1, a federal court ruled the Corporate Transparency Act (CTA) unconstitutional, and the federal government appealed the decision on Monday, March 11. Meanwhile, the Financial Crimes Enforcement Network (FinCEN) has provided notice that as a result of the court's opinion, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024). Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time. CAI wanted to share this news with you immediately and we will provide additional details as they become available.  ​

With this uncertainty, this is a great time to contact your Senator CAI is calling on members and advocates to learn more information about a federal law that has a sweeping impact on most community associations incorporated in the U.S. We need your help to educate Congress about the unintended consequences of this law and urge them to delay implementation and exempt community associations from the requirements.  

The law is the Corporate Transparency Act that passed Congress in 2021. The intent of the legislation was to help detect and report suspicious activity related to money laundering and terrorist finance, to facilitate tracking money that has been sourced through criminal or terrorist activity to safeguard the national security and the financial system of the U.S. This law is being enforced under the Financial Crimes Enforcement Network (FinCEN). This law applies to corporations that have less than $5 million in gross receipts or sales, fewer than 20 employees, and don’t otherwise meet broad exemptions like banks, credit unions, investment companies, venture capital, securities exchange or clearing agency, insurance companies, public utilities, accounting firms, tax-exempt organizations as qualified and determined with status by the IRS, i.e. 501c4 organizations, large operating companies, and inactive entities.  

The consensus by community association lawyers is community associations incorporated at the state level will be impacted by this new law and will have a responsibility to file information with FinCEN through the Beneficial Ownership Information (BOI) reporting requirements. The Beneficial Ownership Information (BOI) reporting program is open for filings. There is a 51 question form to be completed by each association and small business. The current filing deadline for existing corporations is January 1, 2025.  

At a minimum, here is what is going to need to be reported by the community association/small business to the FinCEN federal agency on an annual basis, should an appeal be filed by the Federal Government:

• Business name.
• Legal name of board members, birthdate, home address, an identifying number from a driver’s license, state ID, or passport.
• Individual with substantial control.  The same information (name, birthdate, home address, identifying number) of person (s) who exercise substantial control over financial reporting for the community association corporation.  It is unclear whether a community manager and/or management company qualify as an individual with substantial control.  This is yet to be confirmed.   CAI will continue to evaluate this and provide guidance accordingly.
• Changes, corrections, and additions to the filing must occur within 30 days of when you become aware of the change (i.e., board member moves, is replaced, etc.).

Of great concern, is noncompliance of filing could result in civil penalties of $500 per day and criminal penalties of up to $10,000 and up to 24 months in prison. 

CAI has taken the position that we do not believe  the Anti-Money Laundering Act and Corporate Transparency Act are intended to apply to community associations. Accordingly, we are taking the following measures:  

1. Request community associations be exempt from the Act and the subsequent Beneficial Ownership Information (BOI) reporting requirements.
2. In light of the March 1, 2024 court ruling, request delay of the implementation of the Beneficial Ownership Information (BOI) reporting requirements by having Senators co-sponsor S.3625 - Protect Small Business and Prevent Illicit Financial Activity Act (introduced by Senator Tim Scott (R-SC)), the Senate companion of  H.R. 5119 – Protect Small Business and Prevent Illicit Financial Activity Act, which was approved by the House on 12/12/23 by a vote of 420-1.
3. Urge confidentiality of the individual corporate filings of the Beneficial Ownership Information (BOI) reporting through rulemaking process.
4. After the passage of H.R. 5119, a group of more than 80 Senators and Representatives sent a letter to FINCEN urging a one-year delay of all reporting requirements under the Corporate Transparency Act. 

Our advocacy efforts are helping get the message through to elected officials. We need your help to continue to urge your Senator to support exempting community associations, delaying implementation, and limiting access to the corporate filings.  

Want more information on the Corporate Transparency Act? Visit CAI's website.