Corporate Transparency Act – UPDATE: INJUNCTION REINSTATED
The Corporate Transparency Act is a federal law that became effective on January 1, 2021, to prevent money laundering, terrorist financing, corruption, and tax fraud by making it easier for the government to identify the individuals who operate certain companies and corporations. Although it would be unlikely that most nonprofit corporations would be engaged in such illegal activity, the Act is broadly written to include homeowners associations, condominium associations, townhome associations, and all other forms of community associations.
The Act requires all such community associations to report certain information about their “beneficial owners” to the U.S. Department of Treasury before the end of the day on January 1, 2025. The term “beneficial owners” includes all directors serving on your association’s board and the president and treasurer of the association. The information that is required to be reported includes each beneficial owner’s full legal name, home address, birthdate, identification number (driver’s license, passport, or government-issued ID), and a copy of such identification. Community associations must also report changes of the beneficial owners within thirty days of the change occurring. There are penalties that apply for noncompliance. Penalties increase for willful noncompliance.
Lueder, Larkin & Hunter, LLC can undertake the reporting for your association and remove the inconvenience from the board. This service is only available to clients of the Firm.
The Firm will charge a flat fee for the initial Beneficial Ownership Information Report we submit for your association. The initial Beneficial Ownership Information Report must include the required information for each beneficial owner. When filing the Beneficial Ownership Information Report, we will not undertake the reporting or charge the flat fee until we have the necessary information for all beneficial owners. After that, during the remainder of the calendar year, if there are any changes to the beneficial owners, and we are requested in writing to report the change, we will charge a small fee each time we report updated information.
The Act does not require annual reporting; instead, if there is a change to the beneficial owners, including during any subsequent year, that change must be reported within thirty (30) days. For example, if there is an election at an annual meeting that changes the composition of the board, or if there is a vacancy on the board and a new director is appointed, the change must be reported within thirty days.
UPDATE:
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an Order enjoining the enforcement of the CTA, as well as staying the reporting requirement. This Order was a preliminary injunction that applied nationwide, and remained in effect until further order of the U.S. District Court for the Eastern District of Texas or was otherwise appealed.
The Government appealed this District Court Order to the U.S. Court of Appeals for the Fifth Circuit seeking to stay the injunction. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted the Government’s request to stay the Order issued by the District Court, effectively reinstating the requirement for companies to file their BOI Reports by January 1, 2025.
Following the Order of the U.S. Court of Appeals for the Fifth Circuit, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) extended the deadline for filing the BOI Report to January 13, 2024.
However, on December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit issued a new Order vacating its December 23, 2024 Order. As such, at this time, community associations are not required to file their BOI Reports with FinCen.
This is an ever evolving legal issue. Community associations should be prepared to file their BOI Reports as these cases proceed and further orders are issued.
If you are interested in utilizing Lueder, Larkin & Hunter, LLC to file your association’s Beneficial Ownership Information Report, please contact boireport@luederlaw.com for directions on submitting your information to the Firm.