As many of you may be aware, Congress passed the Corporate Transparency Act in January 2021. The intent of this law is to assist in combatting financial crime and fraud. In connection therewith, the law requires “reporting companies” to report specific information about the owners and managers of their companies to the Financial Crimes Enforcement Network (FinCEN).
There has been some debate as to whether or not Condominium and Homeowner Associations are governed by this Corporate Transparency Act. The prevailing view in the industry is that unless and until the law is clarified or changed, Condominiums and HOAs are considered “reporting companies” that must submit the required information to FinCEN. This information includes the legal name, address, state of formation and taxpayer identification number(s) for the company; and the legal names, dates of birth, residential addresses and government-issued identification numbers for all of the “beneficial owners” of the entity. The Act defines “beneficial owners” as those individuals who (i) directly or indirectly, exercise substantial control over the company; or (ii) own or control at least 25% of the company’s ownership interests. The Directors and Officers of your Community Association are presumably included under the control aspects of the definition.
The reporting date under the Corporate Transparency Act began on January 1, 2024, and any Community Association that was formed prior to that date will have up until January 1, 2025, to file their initial report. Any Community Association that is formed after January 1, 2024, will be required to file their initial report within thirty (30) days of their formation date. Any time there is a change to the “beneficial owners” (e.g., a director resigns, a new director is elected, a director changes her/his address), the association has 30 days to report the change to FinCEN.
The penalty for failing to timely submit required reporting information to FinCEN is $500.00 per day, up to $10,000.
As such, in 2024, it will be very important for Community Associations (Condominiums and Homeowners Associations) to consult with legal counsel as to their requirements and obligations under the Corporate Transparency Act, in order to meet the initial filing deadline of January 1, 2025 and all subsequent reporting deadlines thereafter.
Steven G. Rappaport is an Equity Partner in the Community Associations Practice Group. Mr. Rappaport handles transactional matters for the firm’s community association clients, including drafting amendments to governing documents, attending Board meetings and elections, handling covenant enforcement disputes, and providing opinions on all aspects of association issues. To learn more about Steven including how to work with him, click here.
Associate Attorney Michael Ungerbuehler has been helping community associations across the State of Florida with their legal needs for more than 20 years. In January 2018, Michael joined Sachs Sax Caplan to focus his representation of community associations in South Florida. To learn more about Michael including how to work with him, click here.