The Corporate Transparency Act: Coming to Your Community Soon

CathyA3 (Ohio)
Posts: 6,299

Posted:

This topic seems to be flying under everyone's radar.

The Corporate Transparency Act (CTA) may begin affecting community associations on January 1st, 2024. The Financial Crimes Enforcement Network (FinCEN) has enacted a new rule that mostly targets money laundering, tax fraud and the financing of terrorism. It appears that FinCEN’s regulations cover most community associations and their directors and officers in their reporting requirements.

There are some exceptions in the rule that define "non-reporting companies", but these do not apply to a large majority of community associations. I was hoping that The Powers That Be would issue guidelines or modifications to the rule that state explicitly that community associations were exempt from the reporting requirements. But no such luck. And we occasionally do see cases of boards allegedly engaging in criminal activity that included money laundering and tax fraud - so maybe the CTA should apply to community associations.

The article below from a Virginia law firm summarizes information about the new legal requirements:

The Corporate Transparency Act (CTA)’s Beneficial Ownership Information Reporting Requirements: What Do Community Associations Need to Know?

Quote:
How long do associations have to comply?

When the rule takes effect on January 1st, 2024, all covered associations will have one year to submit their Report (January 1st, 2025). Late filings are subject to penalties including fines of $500 per day, while purposefully false or fraudulent Reports subject a filer to fines of up to $250,000.

This report must contain personal information (including passport number!) of “any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function." That would include the President and Treasurer of many community associations, although you could argue that the rest of the board may perform similar functions - for example, the Secretary/VP often has the authority to act in the absence of the President and may sign contracts, etc.

The CTA also names any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors" - which arguably could include the homeowners in a community association since the board serves at their pleasure. I'm pretty sure that was not the intention of the act since individual owners do not have this authority, but who knows.

And what about community managers to whom many boards delegate a number of their responsibilities? The board remains the ultimate authority, but some boards do give their PMs some level of authority. The dividing line is not clear - and it's generally not spelled out in the bylaws which may contain vague language giving the board the right to delegate tasks.

We live in interesting times.

JaneL2 (Texas)
Posts: 175

Posted:

Quote:

Posted By CathyA3 on 10/15/2023 6:32 AM
This topic seems to be flying under everyone's radar.

The Corporate Transparency Act (CTA) may begin affecting community associations on January 1st, 2024. The Financial Crimes Enforcement Network (FinCEN) has enacted a new rule that mostly targets money laundering, tax fraud and the financing of terrorism. It appears that FinCEN’s regulations cover most community associations and their directors and officers in their reporting requirements.

There are some exceptions in the rule that define "non-reporting companies", but these do not apply to a large majority of community associations. I was hoping that The Powers That Be would issue guidelines or modifications to the rule that state explicitly that community associations were exempt from the reporting requirements. But no such luck. And we occasionally do see cases of boards allegedly engaging in criminal activity that included money laundering and tax fraud - so maybe the CTA should apply to community associations.

The article below from a Virginia law firm summarizes information about the new legal requirements:

The Corporate Transparency Act (CTA)’s Beneficial Ownership Information Reporting Requirements: What Do Community Associations Need to Know?

Quote:
How long do associations have to comply?

When the rule takes effect on January 1st, 2024, all covered associations will have one year to submit their Report (January 1st, 2025). Late filings are subject to penalties including fines of $500 per day, while purposefully false or fraudulent Reports subject a filer to fines of up to $250,000.

This report must contain personal information (including passport number!) of “any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function." That would include the President and Treasurer of many community associations, although you could argue that the rest of the board may perform similar functions - for example, the Secretary/VP often has the authority to act in the absence of the President and may sign contracts, etc.

The CTA also names any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors" - which arguably could include the homeowners in a community association since the board serves at their pleasure. I'm pretty sure that was not the intention of the act since individual owners do not have this authority, but who knows.

And what about community managers to whom many boards delegate a number of their responsibilities? The board remains the ultimate authority, but some boards do give their PMs some level of authority. The dividing line is not clear - and it's generally not spelled out in the bylaws which may contain vague language giving the board the right to delegate tasks.

We live in interesting times.

This is exactly what is needed in our association. Thank you for posting this

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By JaneL2 on 10/15/2023 8:12 AM

Posted By CathyA3 on 10/15/2023 6:32 AM
This topic seems to be flying under everyone's radar.

The Corporate Transparency Act (CTA) may begin affecting community associations on January 1st, 2024. The Financial Crimes Enforcement Network (FinCEN) has enacted a new rule that mostly targets money laundering, tax fraud and the financing of terrorism. It appears that FinCEN’s regulations cover most community associations and their directors and officers in their reporting requirements.

There are some exceptions in the rule that define "non-reporting companies", but these do not apply to a large majority of community associations. I was hoping that The Powers That Be would issue guidelines or modifications to the rule that state explicitly that community associations were exempt from the reporting requirements. But no such luck. And we occasionally do see cases of boards allegedly engaging in criminal activity that included money laundering and tax fraud - so maybe the CTA should apply to community associations.

The article below from a Virginia law firm summarizes information about the new legal requirements:

The Corporate Transparency Act (CTA)’s Beneficial Ownership Information Reporting Requirements: What Do Community Associations Need to Know?

Quote:
How long do associations have to comply?

When the rule takes effect on January 1st, 2024, all covered associations will have one year to submit their Report (January 1st, 2025). Late filings are subject to penalties including fines of $500 per day, while purposefully false or fraudulent Reports subject a filer to fines of up to $250,000.

This report must contain personal information (including passport number!) of “any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function." That would include the President and Treasurer of many community associations, although you could argue that the rest of the board may perform similar functions - for example, the Secretary/VP often has the authority to act in the absence of the President and may sign contracts, etc.

The CTA also names any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors" - which arguably could include the homeowners in a community association since the board serves at their pleasure. I'm pretty sure that was not the intention of the act since individual owners do not have this authority, but who knows.

And what about community managers to whom many boards delegate a number of their responsibilities? The board remains the ultimate authority, but some boards do give their PMs some level of authority. The dividing line is not clear - and it's generally not spelled out in the bylaws which may contain vague language giving the board the right to delegate tasks.

We live in interesting times.

This is exactly what is needed in our association. Thank you for posting this

Jane, why?

BillD16 (Texas)
Posts: 971

Posted:

Quote:

Posted By CathyA3 on 10/15/2023 6:32 AM
This topic seems to be flying under everyone's radar.

The Corporate Transparency Act (CTA) may begin affecting community associations on January 1st, 2024. The Financial Crimes Enforcement Network (FinCEN) has enacted a new rule that mostly targets money laundering, tax fraud and the financing of terrorism. It appears that FinCEN’s regulations cover most community associations and their directors and officers in their reporting requirements.

There are some exceptions in the rule that define "non-reporting companies", but these do not apply to a large majority of community associations. I was hoping that The Powers That Be would issue guidelines or modifications to the rule that state explicitly that community associations were exempt from the reporting requirements. But no such luck. And we occasionally do see cases of boards allegedly engaging in criminal activity that included money laundering and tax fraud - so maybe the CTA should apply to community associations.

The article below from a Virginia law firm summarizes information about the new legal requirements:

The Corporate Transparency Act (CTA)’s Beneficial Ownership Information Reporting Requirements: What Do Community Associations Need to Know?

Quote:
How long do associations have to comply?

When the rule takes effect on January 1st, 2024, all covered associations will have one year to submit their Report (January 1st, 2025). Late filings are subject to penalties including fines of $500 per day, while purposefully false or fraudulent Reports subject a filer to fines of up to $250,000.

This report must contain personal information (including passport number!) of “any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function." That would include the President and Treasurer of many community associations, although you could argue that the rest of the board may perform similar functions - for example, the Secretary/VP often has the authority to act in the absence of the President and may sign contracts, etc.

The CTA also names any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors" - which arguably could include the homeowners in a community association since the board serves at their pleasure. I'm pretty sure that was not the intention of the act since individual owners do not have this authority, but who knows.

And what about community managers to whom many boards delegate a number of their responsibilities? The board remains the ultimate authority, but some boards do give their PMs some level of authority. The dividing line is not clear - and it's generally not spelled out in the bylaws which may contain vague language giving the board the right to delegate tasks.

We live in interesting times.

Wow. The ex-President of my HOA has been giving me grief and making noises like he wants to get back onto the Board. I wonder if I should just let him have it. Let *him* deal with this stuff!

I skimmed the article. Hmm ... 'any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors"' would include everyone on my Board, I think? Since our Bylaws allow Officers to be removed by majority vote of the Board.

Bill

HOA Board ex-President
Austin, Texas USA

“You can’t put too much water in a nuclear reactor”

CathyA3 (Ohio)
Posts: 6,299

Posted:

I don't know that this will necessarily help associations. Maybe it will discourage the small fry crooks from serving on the board - although I'm not too sure about that since small fry crooks aren't always the sharpest knives in the drawer. But the big players that the CTA is going after are already operating under different names, addresses, and passports - and I doubt these guys would be bothering with HOAs that are full of busybody homeowners who gripe about whatever the board is up to.

I'm concerned that it will also discourage honest folks who are concerned about the amount of surveillance in our lives. I'd count myself in this group - except I've already been background-checked, fingerprinted, and interviewed by humorless men in dark suits during my career, so the gubmint already knows about me.

And the reporting requirement creates more work, and failure to comply carries stiff fines. There are so many small self-managed HOAs and condo associations who don't necessarily keep up with things like this. The last thing they need is more work and pricey legal troubles.

Finally, I wonder how useful community association info will be. Board membership is a revolving door. In our case, if we report in December of the year, in three months some or all of those board members will no longer be serving. The law seems to assume that controlling owners and officers will be sticking around for a while.

We're having a board meeting this coming week to discuss the 2024 budget, and I plan to ask our folks and the manager if this is on their radar.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By BillD16 on 10/15/2023 1:23 PM
... snip ....

Wow. The ex-President of my HOA has been giving me grief and making noises like he wants to get back onto the Board. I wonder if I should just let him have it. Let *him* deal with this stuff!

I skimmed the article. Hmm ... 'any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors"' would include everyone on my Board, I think? Since our Bylaws allow Officers to be removed by majority vote of the Board.

Bill

I think the requirement does apply to the entire board, because there can be so much shifting around and changing of responsibilities.

Tim is having enough issues these days, but in his new HOA *the owners* appoint officers. Won't that be fun.

This is a topic for a new thread, but a new law, Assembly Bill 1033, is giving Californians the opportunity to buy and sell ADUs/"granny flats" as condominiums. So the CTA will apply to them as well. (Bold prediction: the folks who decide to try this will have an interesting time.)

JohnC46 (South Carolina)
Posts: 14,265

Posted:

While I think this does not apply, and/or will be modified not to apply, to HOA's as a BOD member it will not stop me from being one. I have nothing to hide and if the information is required, I will gladly provide it. Cheaters cheat. Liars lie.

ElleN (Idaho)
Posts: 4,420

Posted:

After studying this, I predict many associations will spend at least $5000 on attorney fees, to get clarification on what obligations the HOA has for reporting.

I am afraid it makes my blood boil.

KerryL1 (California)
Posts: 14,550

Posted:

With JohnC, I see no reason to become overly concerned. My Board has had some really stupid directors but, thank gawd, only a majority of our directors at one time for one year. Even THAT Board, which happened to include 2 attorneys, wouldn't have expensed HOA funds on something so ridiculous.

Our HOA attorney and/or our MC will provide written assessments to their clients. So will yours if your HOA has contracts with the. CA HOA leaders in small HOAs will undoubtedly see opinions at Davis-stiring.com or in a CA HOA's lawyer syndicated column "HOA Homefront."

Luckily, our annual meeting is Wednesday, which our HOA general counsel always attends as part of his retainer. Open Forum occurs while ballots are being tabulated, and he enjoys fielding questions from owners in attendance. I'll email him in advance so the question doesn't blindside him, he'll give us his thoughts.

I'll report back. Meanwhile, to busy HOA Board members, imo, "chill." You have waaaaaay more important things to think about.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Having legal alerts on things like this is always nice.

For those interested, here is direct information:

Beneficial Ownership Information Reporting US Treasury Web Site.

Transparency Act Compliance Guide from the Federal Government (multiple languages)

Reference Material from the US Treasury Web Site.

The one thing I don't like is not only would we be required to provide our Drivers License Number but would have to include a photograph of it as well. Lets be honest, The Federal Government is not known to keep information secured.

This reporting requirement may reduce the, already minimal, list of volunteers willing to serve on an HOA/COA Board.

Funny, some of the exempt organizations would be the ones I would want to look at (if I were doing this).

TerriS6 (California)
Posts: 3,284

Posted:

“Show me the man and I’ll show you the crime.” This is not enforcement of crimes, this is showing them the man so they can look for a crime. More weaponizing of federal law enforcement agencies.

CathyA3 (Ohio)
Posts: 6,299

Posted:

My take on it is similar to Terri's. I assume they government will troll through the data and look for suspicious patterns - which is nuts, because they won't find the big players who are skilled at evading this sort of nonsense. They may scoop up some small fry and then do a victory lap while the really bad actors repair their networks and go about their business. I'm more concerned that the data will be misused in some way, which is more likely to happen than any disruption of criminal organizations. As for hacking, that horse left the barn a long time ago.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By TimB4 on 10/15/2023 6:36 PM
... snip ......

The one thing I don't like is not only would we be required to provide our Drivers License Number but would have to include a photograph of it as well. Lets be honest, The Federal Government is not known to keep information secured.

This reporting requirement may reduce the, already minimal, list of volunteers willing to serve on an HOA/COA Board.

Funny, some of the exempt organizations would be the ones I would want to look at (if I were doing this).

And passport numbers!!! We occasional argue about HOAs having our email addresses and disclosing them. I can easily see a board member or board candidate saying "oh h3ll no" if the HOA tells them to provide this additional info. (When it gets right down to it, I'm more concerned about HOAs/COAs not protecting this data since cybersecurity usually isn't much of a consideration although it should be.)

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By CathyA3 on 10/15/2023 6:32 AM
The CTA also names any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors" - which arguably could include the homeowners in a community association since the board serves at their pleasure. I'm pretty sure that was not the intention of the act since individual owners do not have this authority, but who knows.

This is the part that I tried to research more. At this writing, I just cannot say that a HOA or condo corporation does not have to submit passport and driver's license information for all owners', including images of the passport or license. The answer I see HOA attorneys giving is, "It's hard to say." To me this translates to "Don't report all owners's information at your own risk."

I have looked at many sites and they seem as clear as mud on the point.

This site (courtesy of TimB4) seems to be detailed and well-laid out: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf

It's one thing to gather and submit (to the Department of the Treasury, Financial Crimes Enforcement Network) this information, for just directors and officers. This does not sound so bad. But gathring and submitting this for all owners? And keeping this up to date?

Worse I suspect it has to be Congress, not merely a government agency via the CFRs, that provides the clarifying language for this.

People should not have to go to a lawyer, to get an interpretation of some seemingly basic requirement, just to live. The elderly should not have to subject themselves to further risk of ID theft because some HOA manager (often possessing minimal education) now has their passport info and a photo of their drivers' license. But there it is.

TerriS6 (California)
Posts: 3,284

Posted:

Ahem, we are from the Federal government and we must have your most personal information so that we can effectively "combat the financing of terrorism." What? What's that? To whom did the Federal government just release $6 billion? Now, back to the other two reasons we need your most personal information!

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By ElleN on 10/16/2023 5:31 AM

Posted By CathyA3 on 10/15/2023 6:32 AM
The CTA also names any individual "having authority over the appointment or removal of any senior officer or a majority of the board of directors" - which arguably could include the homeowners in a community association since the board serves at their pleasure. I'm pretty sure that was not the intention of the act since individual owners do not have this authority, but who knows.

This is the part that I tried to research more. At this writing, I just cannot say that a HOA or condo corporation does not have to submit passport and driver's license information for all owners', including images of the passport or license. The answer I see HOA attorneys giving is, "It's hard to say." To me this translates to "Don't report all owners's information at your own risk."

I have looked at many sites and they seem as clear as mud on the point.

This site (courtesy of TimB4) seems to be detailed and well-laid out: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf

It's one thing to gather and submit (to the Department of the Treasury, Financial Crimes Enforcement Network) this information, for just directors and officers. This does not sound so bad. But gathring and submitting this for all owners? And keeping this up to date?

Worse I suspect it has to be Congress, not merely a government agency via the CFRs, that provides the clarifying language for this.

People should not have to go to a lawyer, to get an interpretation of some seemingly basic requirement, just to live. The elderly should not have to subject themselves to further risk of ID theft because some HOA manager (often possessing minimal education) now has their passport info and a photo of their drivers' license. But there it is.

Now, THAT would make me move,

TerriS6 (California)
Posts: 3,284

Posted:

Don't forget to give them your mother's maiden name.

ElleN (Idaho)
Posts: 4,420

Posted:

I would like to know when, if ever, any non-IRS branch of the Department of the Treasury has gone after a homeowners' or condo association for federal crimes.

Even this recent instance of stealing from HOAs appears to have resulted only in charges at the state level (in Florida): https://www.the-sun.com/news/8774125/florida-hoa-fraud-scheme-stole-millions/

At least one attorney's blog I have seen speaks to the possibility that "Congress will figure out that this law makes no sense for community property associations and add them to the list of exempt entities." It would have been easy to exempt any HOA/COA filing taxes under IRC 528 (meaning the HOA/COA files form 1120 or 1120-H), or at least exempt anyone who was solely an owner (but not a manager, director, officer or attorney for the HOA). But oh no.

Funny how, to date, the D-S site has been silent on this subject. Perhaps because its authors have, with like every other attorney on the net, thrown up their hands and said, as CathyA3 put it so eloquently, "Who knows?"

It is a fabulous way for HOA attorneys to make money.

I see the CTA is a part of the Anti-Money Laundering Act of 2020. Circa late 2020 the CTA was passed by both the Senate and House with bipartisan supermajorities, overriding the President's veto.

SheliaH (Indiana)
Posts: 6,964

Posted:

Interesting - and I agree with Cathy this level of information requesting could give people yet another reason to say "nah" to serving on the board. I'm also wondering if this runs up against state laws regarding homeowner requests for member lists. If you have to provide birthdates and what not to comply with this law, that would make it an association record and therefore any homeowner could request it. We've already had several conversations on providing emails and phone numbers on owner lists.

Normally, I'd say there's already a fair amount of maneuvering afoot in Congress to amend the law to exempt HOAs, but since the House of Representatives (half of them anyway), can't seem to get their shit together on picking someone for Speaker, I think people reading this conversation may want to download the article and take it to their boards, asking them to consult with the association attorney on how to respond. The article did say associations had to start complying in 2025, so that gives everyone a year to educate themselves on how the law came about and why HOAs should/shouldn't be exempt. It'll give Congress more stuff to think about besides their election campaigns, but oh well - they may as well do something useful.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By SheliaH on 10/16/2023 6:47 AM
I It'll give Congress more stuff to think about besides their election campaigns, but oh well - they may as well do something useful.

CAI and its ilk ought to be the organizing movement behind this, and hurrah, CAI is taking substantive steps. See https://advocacy.caionline.org/how-the-corporate-transparency-act-applies-to-community-associations/

In my experience members of Congress more than anything else seek to address those constituent issues (1) over which they have a say and (2) that directly affect their constituents. This is one such issue, IMO.

CathyA3 (Ohio)
Posts: 6,299

Posted:

What's somewhat ironic is that if anyone was planning to use the collected data to spot patterns, then the presence of large amounts of data from community associations - which I assume were not the intended targets of the CTA - may actually muddy the waters and would need to be filtered out.

I often complain about lawmakers not thinking about how proposed laws will actually play out in real life. I suspect this is yet another instance of that.

TerriS6 (California)
Posts: 3,284

Posted:

ElleN wrote: I see the CTA is a part of the Anti-Money Laundering Act of 2020. Circa late 2020 the CTA was passed by both the Senate and House with bipartisan supermajorities, overriding the President's veto.

But this rule is from 2022.

ElleN (Idaho)
Posts: 4,420

Posted:

The CAI prepared a letter for HOA/COA members to send to their representative in the House and their two Senators. Below is my edited version. I recommend people send it or something a lot like it.

Dear [Senator or Representative],

I am writing to you about the Corporate Transparency Act. This new legislation will have an enormous, unintended impact on my [homeowners' association/condominium association] and some 350,000 other homeowners associations, condominium associations, and housing cooperatives across the United States.

Community associations, also known as homeowners associations, condominium associations, and housing cooperatives, are almost always organized as non-profit corporations in the state. However they rarely have IRC 501(c) non-profit tax status. Instead these community associations almost always file taxes under IRC 528 as a non-profit corporation. Per IRC 528 the associations almost always use either Form 1120-H U.S. Income Tax Return for Homeowners Associations or Form 1120 U. S. Corporation Income Tax Return.

These non-profit corporations have shareholders (every owner in the community). The owners each pay their fair share of the non-profit corporation's expenses by paying assessments. Further, the owners select, by election, the board of directors to make decisions on their behalf.

Assessments are like property taxes. Assessments pay for services delivered by the community association in lieu of a municipality. Services typically include trash and snow removal, street maintenance, lighting maintenance, insurance, recreation facilities, stormwater management, landscaping, elevator maintenance, roof maintenance, and maintenance and repair of other amenities. Assessments are commonly the only form of income for an association.

The intent of the Anti-Money Laundering and Corporate Transparency Act was to help detect and report suspicious activity including the predicate offenses to money laundering and terrorist finance, to facilitate tracking money that has been sourced through criminal or terrorist activity to safeguard the national security and the financial system of the United States.

It seems clear this Act was not intended to apply to volunteer-driven nonprofit corporations that are locally based with the sole purpose of providing municipal-like services to residents.

As your constituent, I am concerned about the following:

1. A volunteer board of directors’ compliance with the Beneficial Ownership Information (BOI).
2. Filing personal information that will be accessible to many institutions and organizations of volunteers.
3. The extreme civil and criminal penalties for non-compliance.
4. The many attorneys nationwide who just cannot tell whether the CTA requires community associations to collect, among other things, photos of driver licenses and passport numbers from //all// owners in these community associations

Community associations will have to hire lawyers and other professionals to ensure compliance with these requirements. This will lead to higher living costs for every single homeowner in our community. Further, I expect volunteers will decline service on their community associations' boards of directors due to the exposure to liability.

Please help your constituents living in community associations by exempting community associations from this Act, removing civil and criminal penalties for community associations, ensuring measures to protect our private information, and supporting a delay in implementation.

Thank you for your leadership. Please contact me anytime to further discuss this important issue.

Sincerely,

name
address
phone number
email addie

To use CaI's version, see https://www.votervoice.net/CAI/Campaigns/108066/Respond

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TerriS6 on 10/16/2023 7:12 AM
ElleN wrote: I see the CTA is a part of the Anti-Money Laundering Act of 2020. Circa late 2020 the CTA was passed by both the Senate and House with bipartisan supermajorities, overriding the President's veto.

But this rule is from 2022.

I presume you are talking about the rules the Dept of Treasury created to implement the CTA. Said rules are now published in the U. S. Code of Federal Regulations.

I do not see what the "but" is. Attorney sites are saying (1) the problem is ultimately with Congress; and (2) it is possible the Secretary of the Treasury could delay implementing the rules.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I've made use of CAI's webpage (you can send an email message to your Congress members). I also plan to follow up with snail mail letters.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By ElleN on 10/16/2023 7:38 AM
Posted By TerriS6 on 10/16/2023 7:12 AM
ElleN wrote: I see the CTA is a part of the Anti-Money Laundering Act of 2020. Circa late 2020 the CTA was passed by both the Senate and House with bipartisan supermajorities, overriding the President's veto.

But this rule is from 2022.

I presume you are talking about the rules the Dept of Treasury created to implement the CTA. Said rules are now published in the U. S. Code of Federal Regulations.

I do not see what the "but" is. Attorney sites are saying (1) the problem is ultimately with Congress; and (2) it is possible the Secretary of the Treasury could delay implementing the rules.

Congress passes the laws, but it can take a while for various agencies and departments to figure out how to implement them. It's not unusual for there to be gap of months or even years between passage of the law and publication of the rules.

ElleN (Idaho)
Posts: 4,420

Posted:

My point was that this law had overwhelming support from Congress. Congress is the enemy here, not the Department of the Treasury.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By CathyA3 on 10/16/2023 5:05 AM
Posted By TimB4 on 10/15/2023 6:36 PM
... snip ......

The one thing I don't like is not only would we be required to provide our Drivers License Number but would have to include a photograph of it as well. Lets be honest, The Federal Government is not known to keep information secured.

And passport numbers!!!

Reread the requirement.

It is an OR statement. DL, State ID OR passport number

TimB4 (Tennessee)
Posts: 21,059

Posted:

One thing to keep in mind.

Other then birth date and photo ID, the information collected is the same information that is provided on annual reports to the States Corporation Commission.

Considering your birth date and photo ID are also on file with the State (as a drivers license) or with the Federal Government (as a passport number), all of this info is already available.

AidylP1 (California)
Posts: 173

Posted:

This will never keep me up at night.

JulieH4
Posts: 75

Posted:

I could be wrong here but this paragraph shows you have to own 25% of the property. My community has 140 homes and nobody owns 25% of them all. Please let me know if I am interpreting this incorrectly though!

A covered community association must submit this information on behalf of “beneficial owners” of the association. A beneficial owner is defined as “an individual who, directly or indirectly (i) exercises substantial control over the entity or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.” The definition of a beneficial owner is extremely broad as it includes any individual who exercises a certain level of control over the association, even if that individual holds no ownership interests in the entity.

Thanks!

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JulieH4 on 10/16/2023 11:10 AM
I could be wrong here but this paragraph shows you have to own 25% of the property.

Keep reading. This is only one of the several definitions of a "beneificial owner" whose identifying information the HOA has to collect.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By AidylP1 on 10/16/2023 9:49 AM
This will never keep me up at night.

Oh, this won't keep me up at night. At least the data collection won't - as I said upthread, my data is already there. What concerns me is those stiff financial penalties and the fact that they can do significant damage to associations that are already struggling with insurance issues as well as the usual reluctance to raise assessments. I feel that this issue hasn't received enough attention - maybe because the media outlets assume that the CTA has nothing to do with community associations.

I'm also concerned about the chilling effect this could have on communities like mine where we often have to twist arms to fill our board positions. We had no board for a few months earlier this year and were facing the possibility of receivership. I often feel like we operate on a tightrope around here, and the last thing we need is something else to shove us off balance.

ElleN (Idaho)
Posts: 4,420

Posted:

If I were living in a HOA right now, I would be pretty disgusted with how much time and effort I believe management would have to put in to collect photos of owners' drivers' licenses. No way are owners going to understand this without a lot of prodding. I anticipate attorneys sending demand letters. I anticipate covenants being amended to comply with the new law, said new covenants requiring that owners submit photos of their ID cards and agree to much else pertaining to this new law.

Jesus, Moses and Mary. (sic)

CathyA3 (Ohio)
Posts: 6,299

Posted:

What happens when some board members or officers flat out refuse to provide the info? And refuse to resign?

Is the HOA liable for failing to reporting information that they cannot obtain? Or is the director/officer liable for failing to provide the information?

Does the HOA's insurance cover this nonsense?

If these reports are now corporate records, are owners allowed to see them or is the information on them considered confidential? Can any of it (such as the driver's license number) be redacted?

At least the lawyers will be gainfully employed...

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By CathyA3 on 10/16/2023 1:33 PM
What happens when some board members or officers flat out refuse to provide the info? And refuse to resign?

Legal money is spent finding the answer.

Personally, if it were me having to report, I would fill in the name, address, etc. Under DL I would provide a statement that the individual refused to provide.

Quote:
Posted By CathyA3 on 10/16/2023 1:33 PM

Is the HOA liable for failing to reporting information that they cannot obtain? Or is the director/officer liable for failing to provide the information?

The HOA is likely responsible. Hence, the statement mentioned above under the hopes of mitigating the responsibility.

Quote:
Posted By CathyA3 on 10/16/2023 1:33 PM

Does the HOA's insurance cover this nonsense?

typically, D&O insurance does not cover Director v Director disputes (which is what I expect this would be).
Read your policy to see your policies specific limitations

Quote:
Posted By CathyA3 on 10/16/2023 1:33 PM

If these reports are now corporate records, are owners allowed to see them or is the information on them considered confidential? Can any of it (such as the driver's license number) be redacted?

Yet another legal question.

That said, In looking at the government site, I expect this info to be filed online.
Similar to annual reports, I doubt the Association would keep a copy for themselves (but perhaps they should).

Quote:
Posted By CathyA3 on 10/16/2023 1:33 PM
At least the lawyers will be gainfully employed...

I agree

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ElleN on 10/16/2023 12:15 PM
If I were living in a HOA right now, I would be pretty disgusted with how much time and effort I believe management would have to put in to collect photos of owners' drivers' licenses.

From my reading, the requirement deals only with Directors and Officers (if the officers are not also directors) of Most Associations.
The Directors, because they specify how funds will be spent.
The Officers, because they implement and record said expenditures.

Committee members do not control the funds, so they would not have to comply with this rule.
Members (unless you are in a 4 unit/lot Association) do not own 25%, so they would not have to comply.
Members do not directly control how funds are spent or transferred, so they would not have to comply.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 10/17/2023 5:45 AM

From my reading, the requirement deals only with Directors and Officers (if the officers are not also directors) of Most Associations.
The Directors, because they specify how funds will be spent.
The Officers, because they implement and record said expenditures.

Committee members do not control the funds, so they would not have to comply with this rule.
Members (unless you are in a 4 unit/lot Association) do not own 25%, so they would not have to comply.
Members do not directly control how funds are spent or transferred, so they would not have to comply.

As CathyA3 noted in her first post (quoting a legal web site), its entirely possible all owners would have to submit their information. The language the statute appears to uses is "substantial control," not "direct control," over a reporting company. Other web sites indicate similar to what CathyA3 posted.

See also pdf page 25 of https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf, the section titled "Who is a Beneficial Owner of My Company?"

TimB4 (Tennessee)
Posts: 21,059

Posted:

In my opinion, members typically do not hold any control over the finances.

1) They are required to pay assessments
2) They typically have zero to minimal say on how the assessments are spent
3) The most members do is ratify a budget and, perhaps have a vote on raising assessments or implementing special assessments.

ElleN (Idaho)
Posts: 4,420

Posted:

From the Fairfax law firm site that CathyA3 linked:

A beneficial owner is defined as “an individual who, directly or indirectly (i) exercises substantial control over the entity or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.” The definition of a beneficial owner is extremely broad as it includes any individual who exercises a certain level of control over the association, even if that individual holds no ownership interests in the entity.

CathyA3 (Ohio)
Posts: 6,299

Posted:

There are communities where homeowners do have veto power over the budget. Is that "substantial control"?

I think the problem is that things like "substantial control" mean different things in a community association than they do your typical for-profit corporation. As another example of this, we also have the issue that the homeowners, in aggregate, do appoint/elect and remove board members - they can remove the entire board for any reason at all. I suspect that the CTA was not talking about aggregate control but individual control. But if the language of the CTA doesn't differentiate between the two, then here we are. The letter of the law applies to community associations, but the spirit and intent do not.

There's a reason so many lawyers are waffling over this. The CTA was not written carefully enough.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By CathyA3 on 10/17/2023 9:07 AM
As another example of this, we also have the issue that the homeowners, in aggregate, do appoint/elect and remove board members - they can remove the entire board for any reason at all. I suspect that the CTA was not talking about aggregate control but individual control.

I can see a HOA consisting of six or so units, with no unit having 25% control. With say a three-person board, that's a lot of control these six owners have over the corporation. Congress wanted such corporations to be covered.

This thread seems to be homing in on the unfortunate, one-size-fits-all approach of the statute.

Quote:
Posted By CathyA3 on 10/17/2023 9:07 AM
But if the language of the CTA doesn't differentiate between the two, then here we are. The letter of the law applies to community associations, but the spirit and intent do not.

There's a reason so many lawyers are waffling over this. The CTA was not written carefully enough.
I figure the intent is what it is. The statute was purposely vague so that a lot of thieves would be put on some kind of notice, and so the feds could catch a lot of thieves.

And to continue my grumbly morning: Now I am wondering why CAI is fighting this. This legislation stands to further line the wallets of some of its most enthusiastic members: HOA managers and HOA attorneys.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Another example: so many states have fairly lax laws governing reserve contributions. Even my state allows the membership to vote to not contribute the amount required according to the most recent reserve study. I would consider this substantial control since the financial consequences of underfunding can be significant.

Another example: many associations have low quorum percentages for the annual and special meetings - otherwise nothing would ever get done. My community's quorum is 20% of the voting interests. So you essentially have control over board positions and other items in the hands of 20% of the membership. It's not the same 20% at each meeting, although usually there's significant overlap.

On the other hand, you can find condo associations that are in the process of being bought up by an investor group, and the investors have bought more than 25% of the units. Now that situation may be more of interest to the Powers That Be. But most of the time this is just capitalism doing its thing. What about these?

The more I look at this, the murkier it gets.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ElleN on 10/17/2023 9:18 AM

And to continue my grumbly morning: Now I am wondering why CAI is fighting this. This legislation stands to further line the wallets of some of its most enthusiastic members: HOA managers and HOA attorneys.

In case this wasn't being posted with the sarcastic key turned on:

Personally, I think it may have a big impact on how many are willing to volunteer.

Even though the information is available elsewhere, there are likely plenty of people who may choose privacy over volunteering.

As Melissa has posted many times, the Association isn't required to have your social security number. Well, with this law, there is now a requirement for the association to have everything but your SSN.

Having been a victim of identity theft (which I wish on no one, not even my worst enemy) and having security investigation information compromised by a hack of the federal government, I am thinking twice about allowing a group of volunteers access to this info and expect them to keep it safe.

Membership apathy is large in most Associations.
Associations don't need outside "help" to reduce the volunteer pool.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I agree with Tim about CAI's possible motivation.

This law may also impact sales, I've been debating asking someone from my employer to see if they're aware of the new law, and maybe ask my realtor friend as well. If there's a letter-writing campaign in progress, adding these professionals to the chorus of voices can only help.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 10/17/2023 1:01 PM
Personally, I think it may have a big impact on how many are willing to volunteer.

I agree.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Bumped into the board president yesterday. "Say," I said, "do you know what the Corporate Transparency Act is? Has the board been discussing this?" Why no - no, they have not. So I emailed information to the entire board and the community manager.

I bet a significant number of boards out there have no idea this is coming.

KerryL1 (California)
Posts: 14,550

Posted:

Since this will NOT go into effect until 1/25, I decided not to email our HOA's general counsel to alert him that I'd ask about this topic at our annual meeting & election.

At the annual meeting last night, he brought the about 30 owners in attendance + plus the Board and managers & their manager --up to date on some new legislation, eff. 1/24. He then summarized the above always using the words that "it seems" to or "might" affect all HOAs. He informed us that many of his colleagues are working together nationwide with others to get something to congress to request that while he/others feel including HOAs was completely unintentional, there will be negative consequences for HOAs.

He did tell us the serious penalties, but even joked that our president could end with 24 months in the slammer. So his approach was relaxed, calm and reassuring that it's very possible this legislation will be clarified by 1/25 to not include HOAs.

Based on his report, this. isn't under anyone's radar and has been and is being widely discussed all over the USA. My guess is that since it's so far off many HOA managers and attorneys are not worrying their HOAs boards prematurely and are taking a wait-&-see attitude for now.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By CathyA3 on 10/19/2023 5:37 AM

I bet a significant number of boards out there have no idea this is coming.

I had no idea until it was brought up on this forum.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I imagine associations that have attorneys who proactively keep their clients informed - like the firm we had on retainer did - will know about it. And folks who use CAI resources.

That leaves others who do not have an attorney, or who are self-managed, or who don't even know that their community is an HOA, or whose manager doesn't keep up with this stuff. Who would tell them? I haven't seen anything lately in mainstream media about this. When they did cover money laundering and terrorist networks, there was no mention of HOAs. I never in my wildest dreams imagined that community associations would be affected. And we still don't know for sure that lawmakers intended to include them. If the lawyers don't know, how can we expect volunteer board members to know?

I think the regulars on this website like Tim are well informed. If some of them are taken by surprise, what does that say about everyone else?

Anyway, I know that the deadline for reporting isn't until Jan 1 2025. But other things should be discussed and decided before that. Example: are these reports to the government considered corporate records? Can homeowners view them (I assume driver's license/passport info would be redacted)? How does the association plan to protect personally identifiable data that is not public info the way names and addresses are? Our management company is competent and responsible, but IT/security professionals they are not, God bless 'em. Neither are the board members.

Finally, Congress moves at two speeds: full stop and bat-out-of-hell backwards. If we hope to get them to act before the end of 2024, we should have been yelling a year ago. (Bold prediction: they won't do anything until there's a mess.)