Corporate Transparency Act – UPDATE
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 a preliminary injunction that temporarily halts enforcement of the Corporate Transparency Act (CTA). The Court’s ruling also paused the upcoming January 1, 2025, compliance deadline. Additional details about the case can be found on FinCEN website, which published “[i]n light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” (emphasis added)
The Department of Justice, representing the Department of the Treasury, filed a notice of appeal on December 5, 2024, signaling the government’s intent to challenge the Court’s decision. Given the uncertain outcome of the case, reporting companies may want to continue reviewing their responsibilities under the CTA, such as identifying beneficial owners and gathering the necessary information for BOI submissions. Companies should also stay updated on further developments or guidance from FinCEN.
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.