Resources
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September 30, 2024
The Federal Corporate Transparency Act
Overview
The Federal Corporate Transparency Act (CTA) took effect on January 1, 2024, and will impact most community associations because they are typically corporate entities. Limited liability companies are also subject to the CTA. The purpose of the CTA is to combat money laundering, funding of terrorism, tax fraud, and other unlawful activities by requiring corporations to file reports with the federal Financial Crimes Enforcement Network (FinCEN) identifying the “Beneficial Owners” of the entity. The reports are known as Beneficial Ownership Information Reports (BOIRs) and will be submitted electronically in accordance with regulations adopted by FinCEN. The deadline for filing an initial report for existing entities is January 1, 2025.
Applicability to Community Associations
Community associations were likely not intended to be covered by this legislation, however, the affected entities include corporations established under state law, and this includes most New Jersey community associations. A Beneficial Owner is anyone who exercises “substantial control” over a reporting company or owns or controls at least 25% of the ownership interests and therefore includes community association board members.
Associations created or registered before January 1, 2024, have until December 31, 2024, to file their initial reports.
The CTA is a registration and reporting law. The final FinCEN rule requires the community association to register and requires each board member to provide its full legal name, date of birth, and street address. (This can typically be provided via a current driver’s license or passport.) Social security numbers are not required. Any change in the documents submitted to FinCEN must also be updated, and includes an expired and reissued identifying document, such as a license or passport.
Associations are also required to report changes to the information previously filed and this includes changes in board membership resulting from resignations, elections, or otherwise and changes in the documents submitted to FinCEN, such as an expired and reissued license. Changes must be reported within 30 days of when the association becomes aware or has reason to know of the change or inaccuracy. Therefore, an update must be filed with FinCEN within 30 days of each election or appointment of a new board member, or any board member resignation.
Enforcement
Failure to comply may incur civil and criminal penalties, including a maximum civil penalty of $500 per day (up to $10,000) and imprisonment for up to two years.
Legal Challenges
The CTA has been and continues to be challenged in Congress and in the courts, and the national chapter of CAI is challenging the applicability of the CTA to community associations. We will continue to provide updates as they become available.
The link to the FinCEN website Frequently Asked Questions is: www.fincen.gov/boi-faqs
The Hill Wallack Community Association team is here to help our clients navigate through this process. For further information, contact one of our team members: Ken Sauter, George Greatrex, Gregg Shivers, Michael Karpoff, Terry Kessler, Jenn Webb, Daria Janka, Effie Hibshman, John Bobber, and Chris Lugara.
