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 assets, 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 slated to be implemented with filings beginning January 1, 2024. The current filing deadline for existing corporations is January 1 2025. The filing is not yet open.
At a minimum, here is what is going to need to be reported by the community association to the FINCEN federal agency on an annual basis.
- 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, 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:
- Request community associations be exempt from the Act and the subsequent Beneficial Ownership Information (BOI) reporting requirements.
- Request delay of the implementation of the Beneficial Ownership Information (BOI) reporting requirements by supporting HR4035/S2623.
- Urge confidentiality of the individual corporate filings of the Beneficial Ownership Information (BOI) reporting through rulemaking process.
We need your help to urge Members of Congress to support exempting community associations, delaying implementation, and limiting access to the corporate filings.
Please be aware that this call to action is intended for constituents of certain legislators and Committees. If you are not one of their constituents, then please keep an eye on your inbox for future calls to action!