HOA Compliance

Understanding the Corporate Transparency Act for HOAs

HOAs must comply with the Corporate Transparency Act (CTA) or risk fines up to $10,000. This article explains who needs to file, what information is required, and how to stay compliant. Read on to ensure your HOA avoids costly penalties.

2 months ago   •   7 min read

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Understanding the the Corporate Transparency Act for HOAs
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Starting in 2024, even self-managed homeowner associations (HOAs) must comply with the Corporate Transparency Act (CTA), a federal requirement aimed at improving transparency and preventing financial crimes. The act requires HOAs to report specific details about their leadership to the Financial Crimes Enforcement Network (FinCEN). Although this may seem daunting, understanding the requirements and filing before the deadline will help your HOA avoid penalties and stay compliant.

In this article, we'll explain who needs to file, what information is required, and how your HOA can meet its obligations under the CTA.

Key Points
  • HOAs must establish whether they are classified as a "reporting company" under the Corporate Transparency Act.
  • HOAs required to file must identify all beneficial owners and provide their information within the prescribed timeframes.
  • Even if no individual owns or controls 25% or more of the HOA, FinCEN expects every reporting company to name at least one beneficial owner.

An Introduction to Beneficial Ownership Information Reporting Requirements

What is the Corporate Transparency Act (CTA)?

The Corporate Transparency Act (CTA) was introduced to combat financial crimes, such as money laundering, by increasing transparency around company ownership and control. Its primary objective is to ensure that beneficial owners—those with significant control or ownership—are identified and reported to FinCEN. This increased transparency helps prevent bad actors from using complex corporate structures to hide their activities.[3]

For HOAs, the impact is clear: while some exemptions exist[9], most HOAs will need to comply. HOAs incorporated or registered as legal entities must file a Beneficial Ownership Information Report (BOIR) with FinCEN.

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Beneficial Ownership Information: Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.[2]

Beneficial Ownership Information Report (BOIR): The BOIR is the official filing required under the CTA, in which entities disclose key details about their beneficial owners—individuals with significant control or ownership.

Will HOAs Be Required to File a BOIR?

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Reporting Company: A reporting company is any corporation, limited liability company (LLC), or any other entities created by the filing of a document with a secretary of state or similar office in the United States.[8]

Most HOAs will need to file BOIR with FinCEN, as they are typically incorporated or registered as legal entities, classifying them as "reporting companies[8,10]." While HOAs usually operate as non-profit organizations, they do not qualify as charitable organizations under the tax code, meaning they are not exempt under the 501(c)(4) social welfare organization rule. This requirement also applies to incorporated HOAs, condominium associations, and co-ops, all of which meet the criteria for reporting.[10]

In April 2024, FinCEN issued clarifications highlighting the importance of identifying beneficial owners, even if no individual owns or controls 25% or more of the HOA[12]. In such cases, at least one beneficial owner—typically a senior officer or decision-maker—must be reported.

Who are the Beneficial Owners?

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Beneficial Owners: A beneficial owner is any individual who directly or indirectly owns 25% or more of an organization or exercises substantial control over it[11].

In HOAs, it's rare for one person to own 25% or more, so the focus is usually on individuals who exercise substantial control. Beneficial owners typically include board members or senior officers responsible for making major decisions for the HOA. If several individuals meet these criteria, there can be multiple beneficial owners.

According to FinCEN's guidance[1], an individual is considered to have substantial control if they:

  • Hold a senior officer role, such as President, CEO, CFO, or General Counsel
  • Have the authority to appoint or remove directors or senior officers
  • Play a key role in significant decision-making processes or substantially influence the HOA's operations

Even if no one owns 25% or more of the HOA, your reporting company must still report at least one beneficial owner, typically a senior officer or board member[12].

Who is the Company Applicant?

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Company Applicant: A company applicant is the individual who filed the document that created the reporting company or the person responsible for directing the filing.[13]

Common examples of company applicants include attorneys, registered agents, or professionals who handle the formation process. In some cases, a board member may also be the company applicant if they were directly involved in the incorporation or registration process.

Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants.

What is the Deadline to File a BOIR?

The deadline to file a BOIR depends on when the HOA was formed[4]:

  • HOAs formed before January 1, 2024: Must submit their BOIR by January 1, 2025.
  • HOAs formed on or after January 1, 2024: Must file their BOIR within 90 days of formation.
  • HOAs formed on or after January 1, 2025: Must file their BOIR within 30 days of formation.

If your HOA fails to file the required BOIR, it faces a civil fine of $591 per day, up to $10,000. Criminal penalties, including imprisonment, may apply for willful failure to report or for filing false information.[14]

Other Frequently Asked Questions About Reporting Requirements

Will there be a fee for submitting a BOIR to FinCEN?

No. There is no fee for submitting your beneficial ownership information report to FinCEN.[5]

Is a reporting company required to use an attorney, certified public accountant, enrolled agent, or other service provider to submit beneficial ownership information to FinCEN?

No. FinCEN expects that many, if not most, reporting companies will be able to submit their beneficial ownership information to FinCEN on their own using the guidance FinCEN has issued. Reporting companies that need help meeting their reporting obligations can consult with professional service providers, such as lawyers, accountants, or enrolled agents.[6]

Who can file a BOI report on behalf of a reporting company, and what information will be collected on filers?

Anyone a reporting company authorizes to act on its behalf—such as an employee, owner, or third-party service provider—may file a BOI report on the reporting company’s behalf. When submitting the BOI report, individual filers should be prepared to provide basic contact information about themselves, including their name and email address. The person filing the BOI report, including a third-party service provider, must certify on behalf of the reporting company that the information is true, correct, and complete. (See Question C.15 regarding who can file a BOI report for a reporting company that ceases to exist before its initial BOI report is due to FinCEN.)[7]

Final Thoughts

Compliance with the Corporate Transparency Act (CTA) is crucial for all HOAs—self-managed or not—to avoid penalties. Every HOA must determine if it qualifies as a reporting company, identify its beneficial owners, and submit the BOIR by the required deadlines.

For self-managed HOAs, navigating these requirements can be more challenging due to limited resources. Thankfully, FinCEN's Small Entity Compliance Guide is available to help smaller organizations like yours meet their compliance obligations with ease.

Need help with the filing process? Our step-by-step guide on filing a BOIR which includes a free preparation worksheet is coming later this week. Subscribe now to be notified when it's published!

Footnotes & References

  1. Financial Crimes Enforcement Network (FinCEN). Small Entity Compliance Guide
  2. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. A.1. What is beneficial ownership information?
  3. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. A.2. Why do companies have to report beneficial ownership information to the U.S. Department of the Treasury?
  4. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. B.2. When do I need to report my company's beneficial ownership information to FinCEN?
  5. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. B.4. Will there be a fee for submitting a BOIR to FinCEN?
  6. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. B.7. Is a reporting company required to use an attorney, certified public accountant, enrolled agent, or other service provider to submit beneficial ownership information to FinCEN?
  7. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. B.8. Who can file a BOI report on behalf of a reporting company, and what information will be collected on filers?
  8. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. C.1. What companies will be required to report beneficial ownership information to FinCEN?
  9. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. C.2. Are some companies exempt from the reporting requirement?
  10. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. C.10. Are homeowners associations reporting companies?
  11. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. D.1. Who is a beneficial owner of a reporting company?
  12. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. D.13. Who is the beneficial owner of a homeowners association?
  13. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. E.1. Who is a company applicant of a reporting company?
  14. Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information. Frequently Asked Questions. K.2. What penalties do individuals face for violating BOI reporting requirements?

Disclaimer: The information provided in this article is intended for general informational purposes only. It does not constitute legal, financial, or professional advice, nor is it a substitute for consulting with qualified professionals. While we strive to provide accurate and up-to-date information, we make no guarantees regarding the applicability or accuracy of any information provided. Users are encouraged to consult with a qualified attorney, financial advisor, or legal professional for advice tailored to their specific situation. reTHINK HOA is not responsible for any actions taken based on the information provided in this article.

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