The Corporate Transparency Act and What It Means for Community Associations

By James D. Doyle, Esq.

In 2021, Congress enacted the Corporate Transparency Act, a pivotal piece of legislation aimed at enhancing efforts to combat money laundering, terrorist financing, and safeguarding national security and the U.S. financial system.  Although seemingly distant, this law may have significant implications for condominium and homeowners associations and the communities they serve.

Key Aspects of the Corporate Transparency Act:

1. Applicability and Reporting Deadlines:

The law applies to corporations, including local non-profit corporations with assets less than $5 million, fewer than 20 employees, and those not falling under specific exemptions.  Community associations incorporated at the state level are expected to comply with Beneficial Ownership Information (BOI) reporting starting January 1, 2024, with a filing deadline of January 2025.

2. Reporting Requirements:

Reporting to the Financial Crimes Enforcement Network (FINCEN) involves providing annual electronic filings with details such as business name, legal names, birthdates, home addresses, and identifying information for board members and individuals exercising substantial control over financial reporting.  The latter may include community managers or management companies, a point yet to be clarified.

3. Noncompliance Penalties:

Noncompliance with filing obligations can result in significant penalties, including civil fines of $500 per day and criminal penalties of up to $10,000, along with potential imprisonment for up to 24 months.

4. CAI Advocacy:

The Community Associations Institute (CAI), a membership organization with over 45,000 members, does not believe the Corporate Transparency Act is meant to encompass community associations.  CAI is actively pursuing measures to exempt community associations from the Act and its reporting requirements.  CAI is also supporting legislative initiatives, such as H.R. 4035/S. 2623 and H.R. 5119, to delay the implementation of the BOI reporting requirements and urging confidentiality of individual corporate filings.

Navigating the Corporate Transparency Act may seem complex, but staying informed and seeking professional advice is prudent for community associations to meet their obligations and uphold compliance standards.  Gawthrop Greenwood assists community associations in understanding and navigating the Corporate Transparency Act’s reporting requirements. Through proactive legal support, Gawthrop Greenwood helps community associations meet their obligations, mitigate risks, and adapt to the evolving regulatory landscape.

James D. Doyle is a partner and real estate and community association attorney at Gawthrop Greenwood, where he concentrates his practice in homeowners and condominium association law, real estate transactions and litigation, zoning and land use, buyer/seller disputes and title matters. James is one of only two attorneys to be named to the inaugural class of “Emerging Leaders Under 40” by the Community Associations Institute – Keystone Chapter (CAI). He also serves on Pennsylvania’s Legislative Action Committee for CAI. For more information, contact James at jdoyle@gawthrop.com or 610-696-8225.