The Corporate Transparency Act (CTA) was enacted by Congress in 2021 to combat tax fraud, money laundering, and even domestic terrorism. Even if this doesn’t sound like something your community association should be concerned about, the CTA is broad-reaching. It will likely require your community association to register certain data – including Board member identifying information – with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The first reporting deadline is not until January 1, 2025, so there is time to plan and get ready for the reporting requirements, and time for Congress to maybe come up with some exemptions for certain community associations. But, since I will not be holding my breath waiting for Congress to exempt community associations, I recommend that during 2024, you begin planning for this reporting requirement.
Most Florida community associations are not-for-profit corporations and, therefore, will need to comply with the FinCEN reporting requirement. Few associations, if any, will qualify for the current exemptions. To be in compliance with the CTA, your community association will need to report certain information (called Beneficial Ownership Information, or BOI) about the “beneficial owner(s)” of the corporation.
Who is a Beneficial Owner? In a nutshell, anyone who is an “important decision maker” of the corporation, or who has substantial influence over important decisions made by the corporation, are considered beneficial owners. Some examples of a beneficial owner would be anyone who “has substantial influence over:”
- The entity’s entry into or fulfillment of significant contracts
- Approval of the entity’s operating budget
- Incurrence of any significant debt of the entity
Therefore, likely all Board members of your association are “beneficial owners” and must be included in the report. Reporting involves giving basic information about each Board member such as name, address, date of birth, and driver’s license number. This information is promised to be safeguarded by the government. Beneficial owners can apply for a FinCEN identifier number and use that number on each report instead of the specific identifying information.
Every time there is a new Board member or members, you must update your FinCEN report within 30 days (meaning not just at election time – but any time board members change, resign, die, or are replaced). Therefore, we recommend we wait to assist you with your initial reporting until after your 2024 elections, and into the latter part of 2024.
The jury is still out on whether the manager or management company would be a beneficial owner and therefore required to report their BOI. The analysis may rest on whether material decisions are delegated to the manager from the Board, and whether those decisions can actually be delegated. This may require a look at the wording of your current management contract. The only clarity there seems to be is that an on-site manager may not be a beneficial owner if the manager meets the federal definition of an “employee” of the association, as well as other employee-related criteria. Agents of the association (such as attorneys and accountants) seem to be exempt.
If a new association/corporation is created after January 1, 2024, the person who directly files the corporate documents with the Secretary of State is considered the “applicant,” and must report their BOI information. But if your association was already in existence as of January 1, 2024, the person filing the FinCEN BOI report for you will not need to report their information (unless they otherwise qualify as a beneficial owner).
The willful failure to file a report, or willfully providing false or fraudulent beneficial ownership information may result in civil or criminal penalties, including imprisonment for up to two years; or a fine of up to $10,000.
We will be reaching out to our clients near the end of 2024 to assist you with your BOI filing. Please beware that the scammers and spammers are already out there. FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the CTA.