Corporate Transparency Act

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) is a federal law that was enacted on January 1, 2024, as part of the Anti-Money Laundering Act of 2020. Its purpose is to combat money laundering and terrorism financing by requiring certain organizations to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This is done through a process called Beneficial Owner Information (BOI) reporting. Homeowners associations (HOAs) that are structured like corporations or limited liability companies will likely need to maintain CTA compliance. Nonprofit HOAs or those with fewer than 20 units are exempt from CTA requirements.

Why is the Corporate Transparency Act important for HOAs?

Many homeowners associations have beneficial owners. These individuals maintain primary control over the HOA and benefit from its operations and decisions. HOAs with beneficial owners must adhere to CTA guidelines by filing BOIs on time. Deadlines depend on when the HOA establishes or amends its governing policies. They must also file if there is a change to its beneficial ownership. If an HOA fails to file their BOI, it could face fines of up to $10,000. In severe cases, HOA board members could face imprisonment for non-compliance. 

CTA compliance also provides transparency to community homeowners. It shows which board members have the most control over the HOA’s decision-making process. The CTA also protects community residents from financial loss if one of the HOA’s members is involved in wrongdoing.

How can you use “Corporate Transparency Act” in a sentence?

The HOA board put new bookkeeping measures in place to ensure they adhered to the Corporate Transparency Act.