The Corporate Transparency Act

Every community association in all states needs to be aware of a mandatory filing required by the Corporate Transparency Act (CTA). This legislation, enacted to prevent money laundering in small businesses, requires businesses and tax paying nonprofits to file personal information and complete 51 questions on the U.S. Department of the Treasury’s portal. This article provides an overview of the CTA’s implications and what communities can expect from the legislation.

The act defines an individual who must comply as a “beneficial owner” which is any person with 25% or more ownership or control over an organization. This could include an owner who owns several units as investment properties or the Board of Directors who controls the association. Existing associations have until December 31, 2024, to comply with the filing. However, associations established in 2024 must file within 30 days of becoming incorporated. A developer or person who has control of an association needs to file and update the information as the Board changes.

If a business does not comply, the penalties are harsh. The fines range from $500 a day up to $10,000 and the possibility of criminal prosecution. The information required is personal and much like what a Board would provide to a bank. It includes name, address, a copy of a driver’s license, and more. Although the impact on community association governance is unknown, it could impede future voluntarism. It’s believed community associations were not the intended target. Several organizations including CAI are working to request an extension and even an exemption to this law.

The association’s Directors and Officers policy usually has exclusions for failure to comply with government regulations. Associations need to follow the law. If a lawsuit is brought against an association because of this, coverage may not exist including the duty to defend the suit.

As a member of the Legislative Action Committee for CAI Oregon, I urge homeowner associations to speak up and request a delay in CTA reporting requirements. Recently H.R. 5119 passed in the U.S. House of Representatives and a companion bill is currently working its way through the Senate. This bill aims to delay reporting requirements. Associations can reach out to legislators and demand that the Senate companion bill to H.R. 5119 is passed. CAI’s Advocacy Center can help. Use the Advocacy Center to draft and send a letter to your U.S. Senator.

For further updates on the Corporate Transparency Act please use the following links: