Corporate Transparency Act information for small HOAs
Lawsuit filed to exempt HOAs: September update
On September 10th, the Community Associations Institute (CAI) filed a lawsuit to challenge the Corporate Transparency Act’s(CTA) inclusion of HOAs and condominiums. A preliminary injunction was also filed to provide temporary relief until the court decides the merits of the case. MicroHOA is a member of CAI and is supporting this lawsuit.
The CTA imposes new reporting requirements on many business entities, including community associations. The intent of the law is to combat illegal activities including terrorism financing and money laundering. Compliance is managed by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Under the law, volunteer board members of condominiums, homeowners associations, and housing cooperatives will be required to provide personal information(Beneficial Owner Information) to the federal government as a person who exerts control over the business entity. www.caionline.org/CTA
Although the goal of this legislation from the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) is valuable to preventing money laundering and financial crime, it is misdirected at HOAs. MicroHOA opposes the burdensome and unnecessary requirements that the Corporate Transparency Act requires of small HOA board members, and is concerned about its impact on volunteerism within community associations.
MicroHOA has advised our clients to wait to complete the Beneficial Owner Information (BOI) reporting (link) until potential exemptions were decided by the Department of Treasury or by the courts. As of September, the requirement has not been changed.
More on the lawsuit below and through this link: https://advocacy.caionline.org/protecting-community-associations-cai-files-lawsuit-against-the-united-states-department-of-treasury/
Your support to exempt HOAs from this overreaching legislation would help. Here is a link to take action to exempt community associations from this legislation: https://www.votervoice.net/CAI/Campaigns/116499/Respond
Our hope is that the court will recognize the nonsensical inclusion of HOAs in this legislation. We will update you when the decision is available.
MicroHOA is prepared with options for our clients to meet this requirement if a delay or exemption doesn't happen by late October. At that time, as board members you will have more than two months to file the required report before the January 1, 2025 deadline. The actions required will take a few minutes to complete if they are necessary.
We will have at least two options for compliance. More information to come when it becomes necessary. If your board agrees that you want to move ahead now with compliance, let us know. We will supply directions for you to complete the personal filing.
More information about the Corporate Transparency Act and Beneficial Owner Information reporting
More information about the Corporate Transparency Act and reporting requirements: www.caionline.org/CTA The CTA imposes new reporting requirements on many business entities, including community associations. The intent of the law is to combat illegal activities including terrorism financing and money laundering. Compliance is managed by the Department of the Treasury. Under the law, volunteer board members of condominiums, homeowners associations, and housing cooperatives will be required to provide personal information(Beneficial Owner Information) to the federal government as a person who exerts control over the business entity.
More information about the reasons the CTA gives to require HOA board members to file a Beneficial Owner Information Report: Under the law, volunteer board members of condominiums, homeowners associations, and housing cooperatives will be required to provide personal information to the federal government, because the CTA considers them beneficial parties of the HOA business entity. More on Beneficial Owner Information here: https://www.fincen.gov/boi-faqs
Substantial penalties for non-compliance: Of great concern is that noncompliance of filing could result in civil penalties of $500 per day and criminal penalties of up to $10,000, as well as up to 24 months in prison for Beneficial Owners who don't file.
More on the action taken to exempt HOAs: CAI has worked with the Treasury Department for over a year to pursue a regulatory exemption for community associations but has been unsuccessful. Since the law’s implementation date for existing associations is Jan. 1, a lawsuit was deemed necessary to protect community association rights and ensure they are exempt from the act.
Along with the full complaint (lawsuit), CAI is filing a motion for preliminary injunction. A preliminary injunction is temporary relief that maintains the status quo until the court decides the merits of the case.
The lawsuit seeks to:
Obtain a declaration that the Corporate Transparency Act does not apply to community associations, including condominiums, homeowners associations, and housing cooperatives.
Challenge FinCEN’s decision not to exempt HOAs from the act.
Request judicial review of the denial of exemptions, which the lawsuit asserts is both unlawful and unconstitutional.
CAI is committed to protecting members from regulations that threaten privacy and discourage volunteerism within community associations. We are pursuing this lawsuit to ensure that communities can continue to operate without unnecessary and burdensome regulations.
We will keep you informed of any updates as this lawsuit progresses. In the meantime, please visit www.caionline.org/CTA to find answers to frequently asked questions.
