Meanwhile Back at the Corporate Transparency Act Kerfuffle...

CathyA3 (Ohio)
Posts: 6,299

Posted:

I received an email from CAI this morning. It began with:

"The CAI Board of Trustees approved filing a lawsuit to exempt and protect community associations from burdensome requirements outlined in the Corporate Transparency Act. The lawsuit against the U.S. Department of Treasury challenging the Corporate Transparency Act (CTA) underscores CAI’s unwavering commitment to protecting the community association housing model and our members’ interests."

This action follows a similar lawsuit filed by the National Small Business Association and a ruling by a federal court in Alabama that the CTA is unconstitutional. Unfortunately the ruling only applies to members of the National Small Business Association. Given how slowly the courts move, at this time community association board members should plan to comply with the CTA's reporting requirements. Boards should consult with their associations' attorney for more information and guidance.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By CathyA3 on 07/18/2024 8:28 AM
I received an email from CAI this morning. It began with:

"The CAI Board of Trustees approved filing a lawsuit to exempt and protect community associations from burdensome requirements outlined in the Corporate Transparency Act. The lawsuit against the U.S. Department of Treasury challenging the Corporate Transparency Act (CTA) underscores CAI’s unwavering commitment to protecting the community association housing model and our members’ interests."

This action follows a similar lawsuit filed by the National Small Business Association and a ruling by a federal court in Alabama that the CTA is unconstitutional. Unfortunately the ruling only applies to members of the National Small Business Association. Given how slowly the courts move, at this time community association board members should plan to comply with the CTA's reporting requirements. Boards should consult with their associations' attorney for more information and guidance.

not sure why CAI is lobbying against it. some HOA lawyers undoubtably will make money charging board to fill out the paperwork which is noting more than uploading your drivers license and contact info.

vis ta vie

TimB4 (Tennessee)
Posts: 21,060

Posted:

The federal government has had my personal info taken by hackers multiple times.
They do not have a good track record of keeping such info safe.
Because of this fact, combined with the requirement to give them more personal info (which is available to them if they obtained a search warrant), I may consider not being on the future boards.
It's possible this may be what others, who are aware of the act, may be thinking as well.

This is likely why CAI will challenge the statute.
However, similar to the SBA ruling, if CAI wins I can see a similar ruling (don't belong to CAI - keep reporting) as precedence has been set.

JackieB4 (California)
Posts: 398

Posted:

It is well-known among many(most?) CA HOA's, etc... that due to voter apathy and lack of tranparency with confusing Board Books, along with a plethora of excuses, there is major financial mismanagement within the PMC business. Even the CA Board of Real Estate is aware of the fraud ..."but lack the manpower to regulate it." I support this new Transparency ACT.
We (owners) need this Federal attention.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By TimB4 on 07/18/2024 5:30 PM

However, similar to the SBA ruling, if CAI wins I can see a similar ruling (don't belong to CAI - keep reporting) as precedence has been set.

so you think if CAI wins it will only apply to hoa board members who are also CAI members? Wonder what percentage of HOA boards are CAI members. It's gotta be very small.

vis ta vie

WendyM5 (North Carolina)
Posts: 1,522

Posted:

does this also mean if the HOA joins the SBF they do not have to file the CTA paperwork?

vis ta vie

MarshallT (New York)
Posts: 414

Posted:

Thanks for the update. I agree, associations should be prepared to file a report, at least this year, since it can take several months for the courts to make decisions.

TimB4 (Tennessee)
Posts: 21,060

Posted:

Quote:

Posted By WendyM5 on 07/19/2024 4:50 AM

Posted By TimB4 on 07/18/2024 5:30 PM

However, similar to the SBA ruling, if CAI wins I can see a similar ruling (don't belong to CAI - keep reporting) as precedence has been set.

so you think if CAI wins it will only apply to hoa board members who are also CAI members? Wonder what percentage of HOA boards are CAI members. It's gotta be very small.

I think it might only apply to Associations that are members of the CAI

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By TimB4 on 07/19/2024 7:13 AM

Posted By WendyM5 on 07/19/2024 4:50 AM

Posted By TimB4 on 07/18/2024 5:30 PM

However, similar to the SBA ruling, if CAI wins I can see a similar ruling (don't belong to CAI - keep reporting) as precedence has been set.

so you think if CAI wins it will only apply to hoa board members who are also CAI members? Wonder what percentage of HOA boards are CAI members. It's gotta be very small.

I think it might only apply to Associations that are members of the CAI

You may be right. We'd have to read the legal filings when they become available.

I'm still trying to figure out if I need to report my info since I'm only an officer, not a director. I don't vote, don't count toward quorum, recuse myself if the board discusses legal issues with the attorney, and I only own my unit. So I'm probably not a beneficial owner and I don't exercise substantial control. My official title is Advisor to the Board - in other words I'm an Influencer.

KerryL1 (California)
Posts: 14,550

Posted:

What is see is that my big post yesterday about CAI appeared on this forum. but it is INVISIBLE. Why, moderator?? CAI IS the major USA organization that advocates for HOAs. It's an excellent site of educational resources, some of which cost nothing.

S
ome here believe it only serves its members; it most certainly does not. See its activity & updates on the Corp. Transparacy Act (CTA) at CAIonline. Poke around and you'll find that the CAI is avocating for the CTA to NOT include all HOAs -- not just of its members!

CathyA3 (Ohio)
Posts: 6,299

Posted:

i wondered where your post had gone to, because I saw your name in the Last Post column.

I agree that CAI provides a valuable service to community associations in general. And they're certainly speaking out on behalf of all community associations as far as the CTA goes.

With a lawsuit, though, if it's a class action suit, you have to be a member of the class for the ruling to apply to you. Based on my memory of other class action suits I've received notice about, I think they also have to allow you to opt out of participating in the suit (including any settlement that results) and preserve your right to file a lawsuit on your own.

Someone who is seriously concerned about privacy violations and whatnot may find it worth their while to become a member of CAI - although there could be an issue with having to be a member as of the date that the suit was filed.

KerryL1 (California)
Posts: 14,550

Posted:

AhHa. thanks, Cathy, I didn't know that this "class action suit" would solely benefit CAI's members!

Meanwhile the moderators have offered no explanation about why they removed my post that was listed as a "Last Post" on this topic. I'm an admitted rule-follower and none were broken in the post. It did discuss CAI, but the Institute that certifies community managers and reserves specialists and whose sole purpose is to advocate for HOAs, I cannot imagine why the info in my post was in violation. I noted that neither I nor my HOA Board is nor or has ever been a member. Finally I didn't make a copy of it and would like mine returned to me.

CathyA3 (Ohio)
Posts: 6,299

Posted:

We occasionally mention CAI around here, so I hope that's not the issue. We can't talk about this particular topic without mentioning them.

I've had a post or two disappear in the past. I chalked it up to website weirdness.

DeanJ
Posts: 1,786

Posted:

What is the basis of the lawsuit?

CathyA3 (Ohio)
Posts: 6,299

Posted:

They haven't filed it yet, so we can't read the actual text.

But assuming that they take the same line of argument as the National Small Business Association did - and the same line that many lobbyists are taking - it's that the CTA is unconstitutionally broad and sweeps up a bunch of corporations that were not the intended targets of the legislation. The act was meant to disrupt international money laundering and terrorist financing networks - not the sort of thing your typical community association gets involved in.

The worst example of criminal activity in an HOA that I've is the small gang that took over a Florida HOA. As far as I can tell, this group was acting solely for its own benefit and didn't have ties to international criminal networks. The large majority of crime in HOAs is what I call the small fry stuff: eg., a treasurer helps himself to some of the funds. Clearly these small fry do a lot of damage to their own associations which aren't rolling in dough, but the damage is localized.

BrendaP3 (North Carolina)
Posts: 21

Posted:

Our Board of Directors just received a notice from our management company about the CTA. They want to charge us $495 per year to ensure compliance with the federal mandate. The fee would go to a 3rd party that specializes in ensuring compliance. Is this typical of what others NC HOA Boards have received? I'm going to have to start researching this.

KerryL1 (California)
Posts: 14,550

Posted:

Good question--I'll ask our board president what/if our mgmt. co. (MC) is charging.

Meanwhile, at CAIonline, poke around to find a great deal of info avmaialbe to non-members about the ACT. CAI, for instance has sought a 1-year delay for implementation, which, I think they wrote, has been passed by the House & is headed to the Senate.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I discovered last night that our association's former attorney has created an addition to their on-line portal for their clients to submit their boards' information to the Feds. Since this law firm is all about keeping their clients out of legal trouble, I'm not surprised that they're offering this service. I bet they will also have reliable opinions about who needs to submit their information and who doesn't need to.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By CathyA3 on 07/25/2024 5:40 AM
I discovered last night that our association's former attorney has created an addition to their on-line portal for their clients to submit their boards' information to the Feds. Since this law firm is all about keeping their clients out of legal trouble, I'm not surprised that they're offering this service. I bet they will also have reliable opinions about who needs to submit their information and who doesn't need to.

how much are they charging to submit the Drivers Lice to the feds?

vis ta vie

CathyA3 (Ohio)
Posts: 6,299

Posted:

Another update from CAI. Quote:

On July 15, 2024, Representative Richard McCormick (R-GA-6) introduced H.R. 9045 - To amend title 31, United States Code to exempt entities subject to taxation under section 528 of the Internal Revenue Code of 1986 from certain beneficial ownership reporting requirements. H.R. 9045 would exempt community associations from the requirements of the Corporate Transparency Act, codifying a needed protection for you and your community. It is imperative that Members of the House agree to Co-Sponsor H.R. 9045, and that the Senate introduce a companion bill.

As usual, CAI encourages people to contact their Congresspersons in support of exempting community associations from the reporting requirements of the CTA, even if they have done so in the past.

KerryL1 (California)
Posts: 14,550

Posted:

Given this wording, Cathy, it appears that CAI is speaking for all Hospitals, not solely its membership?

CathyA3 (Ohio)
Posts: 6,299

Posted:

I assume you mean all associations, not just members.

In this case, since we're talking about a bill in Congress, I assume it will apply to all associations. But it will depend on the final text of the law, assuming this bill and (we hope) a companion Senate bill will successfully make it through the legislative obstacle course.

This is different from lawsuits since the court's ruling will apply only to the individuals or groups who were named in the suit. If it's a class action lawsuit, there will be stick definitions for who is contained in the class.

Right now CAI strongly supports actions that will result in community associations being exempt from the CTA, and I assume they'll welcome all efforts to contact our legislators and support the cause.

KerryL1 (California)
Posts: 14,550

Posted:

Yes, sorry about my typos-- all HOAs.

KerryL1 (California)
Posts: 14,550

Posted:

Yes, sorry about my typos-- all HOAs.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

old mgt firm just sent me an email. they want $400 the first year and $350 every year after to make sure you are registered properly. CASH COW easy money for them for 20 min of work. I'm sure they will rake in over 70% of the board to pay this ridiculous fee.

This is what I dont' get. Why is CAI against something that makes it's membership money???

vis ta vie

PhyllisL3 (California)
Posts: 116

Posted:

The preliminary information my board has gathered about registering our information is that it has to be submitted for all the beneficial owners in the same session. If anyone leaves or joins the board, or if anyone has a name change, you have to submit the information all over again for everyone. Like others, we have heard that joining CAI might qualify us for coverage under their lawsuit and the word is that they are not sure if the suit is won that it would apply to HOAs who are not members of CAI. In other words, it might work like a class action suit. In any event, these lawsuits are not going to be settled quickly and everyone had better plan on submitting the information of their beneficial owners.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By BrendaP3 on 07/24/2024 5:43 PM

Our Board of Directors just received a notice from our management company about the CTA. They want to charge us $495 per year to ensure compliance with the federal mandate. The fee would go to a 3rd party that specializes in ensuring compliance. Is this typical of what others NC HOA Boards have received? I'm going to have to start researching this.

You're hiring their lawyer to keep your board compliant. I'm told by professional managers that this CTA could hold directors personally liable for fines for non-compliance, not the HOA organization. I think such focus on those directors who willfully non-comply out of protest or unwillingness to offer their information.

Our board just budget 500 dollars to hire our attorney to ensure we're all compliant.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By WendyM5 on 09/11/2024 1:42 PM
old mgt firm just sent me an email. they want $400 the first year and $350 every year after to make sure you are registered properly. CASH COW easy money for them for 20 min of work. I'm sure they will rake in over 70% of the board to pay this ridiculous fee.

This is what I dont' get. Why is CAI against something that makes it's membership money???

As a guess:

* Community associations should not have been subject to this legislation to start with.

* The reporting requirement creates additional work for those who are already strapped for time.

* It creates a chilling effect on homeowners' willingness to serve on the board, which is clearly detrimental to associations.

* The penalties assessed to those who do not comply may be appropriate for the large corporations that were the target of the legislation, but are inappropriate for volunteers in community associations.

* Many self-managed association boards are probably unaware of the CTA.

CAI acts as a lobbyist to represents the interests of community associations. The CTA and reporting requirements are harmful to the welfare of corporations that should not have been caught up in this at all. CAI is doing its job - and kudos to any entity that puts its duties ahead of short term, personal financial gain.

Although I expect the benefit they get from taking this approach will outweigh the fees that they could get, and they're taking the long view. Successful organizations usually do take the long-term approach.

Finally, any portals, monitoring, etc. that are offered to clients have cost money to develop and will continue to cost money to maintain. Why on earth should that be provided for free? If people want free, they can go to the government website - nobody is holding a gun to anyone's head.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I think it is time to stop reading, drinking, and time to go to bed. Bye all.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By CathyA3 on 09/12/2024 2:01 PM

Posted By WendyM5 on 09/11/2024 1:42 PM
old mgt firm just sent me an email. they want $400 the first year and $350 every year after to make sure you are registered properly. CASH COW easy money for them for 20 min of work. I'm sure they will rake in over 70% of the board to pay this ridiculous fee.

This is what I dont' get. Why is CAI against something that makes it's membership money???

As a guess:

* Community associations should not have been subject to this legislation to start with.

* The reporting requirement creates additional work for those who are already strapped for time.

* It creates a chilling effect on homeowners' willingness to serve on the board, which is clearly detrimental to associations.

* The penalties assessed to those who do not comply may be appropriate for the large corporations that were the target of the legislation, but are inappropriate for volunteers in community associations.

* Many self-managed association boards are probably unaware of the CTA.

CAI acts as a lobbyist to represents the interests of community associations. The CTA and reporting requirements are harmful to the welfare of corporations that should not have been caught up in this at all. CAI is doing its job - and kudos to any entity that puts its duties ahead of short term, personal financial gain.

Although I expect the benefit they get from taking this approach will outweigh the fees that they could get, and they're taking the long view. Successful organizations usually do take the long-term approach.

Finally, any portals, monitoring, etc. that are offered to clients have cost money to develop and will continue to cost money to maintain. Why on earth should that be provided for free? If people want free, they can go to the government website - nobody is holding a gun to anyone's head.

I disagree. HOAs need to included in this legislation,

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By DeanJ on 09/13/2024 4:15 PM

Posted By CathyA3 on 09/12/2024 2:01 PM

Posted By WendyM5 on 09/11/2024 1:42 PM
old mgt firm just sent me an email. they want $400 the first year and $350 every year after to make sure you are registered properly. CASH COW easy money for them for 20 min of work. I'm sure they will rake in over 70% of the board to pay this ridiculous fee.

This is what I dont' get. Why is CAI against something that makes it's membership money???

As a guess:

* Community associations should not have been subject to this legislation to start with.

* The reporting requirement creates additional work for those who are already strapped for time.

* It creates a chilling effect on homeowners' willingness to serve on the board, which is clearly detrimental to associations.

* The penalties assessed to those who do not comply may be appropriate for the large corporations that were the target of the legislation, but are inappropriate for volunteers in community associations.

* Many self-managed association boards are probably unaware of the CTA.

CAI acts as a lobbyist to represents the interests of community associations. The CTA and reporting requirements are harmful to the welfare of corporations that should not have been caught up in this at all. CAI is doing its job - and kudos to any entity that puts its duties ahead of short term, personal financial gain.

Although I expect the benefit they get from taking this approach will outweigh the fees that they could get, and they're taking the long view. Successful organizations usually do take the long-term approach.

Finally, any portals, monitoring, etc. that are offered to clients have cost money to develop and will continue to cost money to maintain. Why on earth should that be provided for free? If people want free, they can go to the government website - nobody is holding a gun to anyone's head.

I disagree. HOAs need to included in this legislation,

Becauae... ?

CathyA3 (Ohio)
Posts: 6,299

Posted:

For those who don't know:

Corporate Transparency Act (CTA): Purpose, Implementation, and Recent Changes from Investopedia. Quote:

The Corporate Transparency Act (CTA) is a federal law enacted on January 1, 2021, with rules scheduled to go into effect on January 1, 2024. It is “intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the United States,” according to the U.S. Department of the Treasury and its Financial Crimes Enforcement Network (FinCEN) bureau.

While rogue board members or embezzlers can cause grief in their own communities, they are penny ante small fry who don't come close to being the targets of this legislation. The law is going after the Big Bad Guys who move hundreds of millions of dollars through off shore shell companies nested many layers deep. The only thing that would raise a fraction of a hint of a whisper of an iota of suspicion for me would be HOAs or condos that come under the control of a corporate entity of some sort (I'm looking at you, investors). Still, that sounds more like the plot for the latest financial thriller.

And just how likely is it, do you suppose, that the real targets of the CTA will dutifully report their information to the government? Snowball's chance in Hades, amiright? If they report anything, the information will be fake and masterpieces of misdirection. You don't get to be a financier of international terrorism without skills.

But the gubmint is gonna to find out all about HOA board members, by gum - those who are still willing to serve on boards, that is. There are plenty of folk out there with legitimate security and privacy concerns - and they didn't want to serve on the board anyway. This gives them a reason based on principle instead of just "nah, bro, don' wanna". This is the last thing condo communities need.

CathyA3 (Ohio)
Posts: 6,299

Posted:

A last quote from the linked article above:

... an article on the American Bar Association’s website observed, “The Act is designed to cast a broad net to ‘catch’ a small niche of nefarious actors hiding behind the ‘corporate veil.’ Unfortunately, the vast majority of business entities that now must comply with the CTA, including most small businesses, are unwitting and innocent bycatch in the CTA’s net.”

My take: The Corporate Transparency Act won't accomplish what it was intended to do. Due to the international nature of financial networks, the real bad actors who are the targets of the legislation can easily evade it. The Act also specifically exempts a number of larger organizations where evidence of financial misconduct can more easily be hidden. The CTA is window dressing - a fishing expedition with significant unintended consequences that Congress can point to and claim they're taking real steps to curtain financial crimes. Meanwhile the crooks go merrily on their way.

TerriS6 (California)
Posts: 3,284

Posted:

https://www.caionline.org/Advocacy/Priorities/CTA/Documents/FAQ%20FINAL.pdf

CathyA3 (Ohio)
Posts: 6,299

Posted:

Note this quote from the document that Terri linked:

Q: Are any community associations currently exempt from the CTA?

A: Yes. Community associations that hold an active 501(c)(4) IRS tax exemption are already exempt from filing. In addition, community associations with more than $5 million in annual revenue and 20 or more employees qualify under the current exemptions.

My comment: Which communities do you suppose are more likely to be able to hide whatever criminal behavior they're up to: a 50-unit condo association that's self-managed or that employees only a bookkeeper, or a large HOA with more than $5 million in annual revenue and 20 or more employees? Does this inspire confidence or a belief that providing your personal information will do anything other than putting your information at risk?

I'm happy to see the lawsuit. It may be more effective faster than waiting for Congress to clean up their mess.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Note this quote from the document that Terri linked:

Q: Are any community associations currently exempt from the CTA?

A: Yes. Community associations that hold an active 501(c)(4) IRS tax exemption are already exempt from filing. In addition, community associations with more than $5 million in annual revenue and 20 or more employees qualify under the current exemptions.

My comment: Which communities do you suppose are more likely to be able to hide whatever criminal behavior they're up to: a 50-unit condo association that's self-managed or that employees only a bookkeeper, or a large HOA with more than $5 million in annual revenue and 20 or more employees? Does this inspire confidence or a belief that providing your personal information will do anything other than putting your information at risk?

I'm happy to see the lawsuit, which was filed on September 10, 2024. The documents are available on CAI's website and make for interesting reading. There are a number of affidavits submitted by community association board members that are attached to the legal filings. Here's a quote from one:

20. Given the requirements of the Federal Corporate Transparency Act, I am likely to resign as a volunteer Trustee now that I understand I have to provide private information to the Federal Government, including a copy of my Massachusetts driver’s license or passport, both of which contain a photograph of my face.

21. I am particularly concerned that the Federal Corporate Transparency Act permits the Federal Government to share my personal information, including a photograph of my face, with other federal and state agencies as well as foreign governments for law enforcement purposes, in most cases without requiring a showing of reasonable suspicion of criminal activity or judicial oversight.

22. I anticipate that the Corporate Transparency Act’s filing requirements will result in resignations by other members of our Board of Trustees for the same reasons and will stifle future volunteerism at the Condominium.

I'm seriously concerned about my community. We had a complete turnover of the board last summer, and since then we've had 3 resignations. Our longest-serving board member has been on the job for 14 months. Another one has been serving 4 months. I've been on the job for 6 days (i kid you not). The last thing we need is another reason for resignations, although I don't plan to go anywhere. We could literally spend most of our time keeping the government apprised of all the comings and goings (anyone who reviewed the information would think they were being trolled).

I also wonder how courts will handle a possible flood of communities that need to go into receivership because nobody is willing to serve.

PhilipB6 (California)
Posts: 2

Posted:

That’s a great point about the need to resubmit all beneficial owner info anytime there’s a change—it sounds like a real administrative headache for HOAs. Given how slow lawsuits move, it seems like compliance is inevitable for now, even if groups like CAI are pushing back.

For boards looking to make the process easier, CTA filing services can help handle submissions and updates without the hassle. They ensure everything is filed correctly with FinCEN and keep up with any changes in the law. Definitely worth considering if managing this in-house becomes too much of a burden.

Has anyone found a particularly efficient way to handle these filings, or is everyone just bracing for impact?

CathyA3 (Ohio)
Posts: 6,299

Posted:

I filed my community's info because I know my way around the web and have been keeping up with the legal gyrations. Personally, I'm more concerned about filling board seats. I live in a condo community, and finding willing volunteers has always been a challenge. The CTA isn't helping matters.