As community associations navigate the intricacies of compliance with the Corporate Transparency Act (CTA), it’s imperative to understand the nuances of this legislation and advocate for the best interests of community associations. The CTA, enacted in 2021, combats money laundering by requiring entities, including most community associations, to disclose beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN).
Compliance with the CTA is multifaceted, with various criteria and exemptions community associations must navigate. Associations must file a BOI report if they meet certain criteria, such as being a nonprofit corporation, limited liability company, or similar entity. However, exemptions exist for associations with more than 20 full-time employees and gross receipts exceeding $5 million in the prior tax year. Gross receipts would include assessments, revenue from club house rentals, and any other revenue generated by the community association. Full-time employees would include direct employees of the community association, not contract employees or individuals working for the community association through a management contract.
Understanding who qualifies as a beneficial owner under the CTA is crucial. Beneficial owners are individuals who exert substantial control over the association or own/control at least 25% of the ownership interests. This definition encompasses most boards of directors; including officers elected to govern community associations. It is likely committee members and community managers do not constitute a beneficial owner and are not required to file.
CAI is developing guidance for community associations, including FAQs, that will be released in the coming weeks. Below are several resources to help answer your questions.
We continue to advocate to exempt community associations from the requirements and/or delay the filing requirements for existing community associations from Jan. 1, 2025, to Jan. 1, 2026.
You play a vital role in advocating for members’ interests. Proactive engagement can help shape regulations and enforcement mechanisms that are fair and reasonable for associations of all sizes. More than 3,000 people engaged in CAI’s call to action to urge delay and exemption. Our voice is heard, but we need to deliver more meaningful messages.
You can help! Please click here to contact your senator to let them know you support exemption for community associations and to urge a delay in compliance for existing associations.
Resources
- Corporate Transparency Act Information and Further Details for Community Associations
- CAI Advocacy Campaign
For additional assistance and updates, consult with legal counsel specializing in community association law.
