Understanding the Corporate Transparency Act (CTA): What HOAs need to know.

February 28, 2025 | Accounting, HOAs, Property Management, Security | Property management

Introduction to the Corporate Transparency Act (CTA)
What is the Corporate Transparency Act?
Who must comply with the CTA?
Who is a company applicant?
Understanding beneficial ownership
What information needs to be reported?
Filing requirements and deadlines
Penalties for non-compliance
Concerns and challenges for HOAs and small businesses
Current legal challenges
Steps to prepare for compliance
Conclusion
Learn how UpperBee can streamline your condo and HOA management tasks today

Introduction to the Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) is a vital piece of legislation aimed at improving business and organizations like homeowners associations (HOAs) transparency in the United States. The CTA was passed by Congress as part of the Anti-Money Laundering Act, the CTA seeks to prevent illicit activities like money laundering, tax evasion, and terrorism financing. Starting in January 2024, entities across the country, including many HOAs, are required to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury.

In this blog post, we will break down the key components of the CTA, how it impacts HOAs and small businesses, and what steps you can take to ensure compliance. Whether you manage an HOA, own a business, or serve on a board, this guide will provide clarity and actionable insights.

What is the Corporate Transparency Act?

The purpose of the CTA

The primary goal of the Corporate Transparency Act is to combat illegal activities by increasing the transparency of ownership and decision-making structures. By requiring entities to disclose detailed information about their owners and board members, the government hopes to:

Prevent money laundering: Criminals often hide their illegal profits through anonymous entities.
Counter terrorism financing: Transparent ownership makes it harder for terrorist groups to funnel money.
Ensure tax compliance: Transparency reduces opportunities for tax evasion.

This law ensures that bad actors cannot exploit the corporate or organizational structure to conceal their activities.

Who enforces the CTA?

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) is responsible for enforcing the Corporate Transparency Act. Entities, including HOAs, are required to submit BOI reports electronically to FinCEN.

Who must comply with the CTA?

Entities covered by the CTA

The CTA applies to a wide range of entities. If your HOA or organization is structured as a corporation, limited liability company (LLC) or other similar entity and was created by filing a document with your state’s secretary of state, it is likely subject to this law.

Exemptions under the CTA

While the law is broad, there are twenty-three categories of exemptions. Entities that do not need to file a BOI report include:

Large operating companies: Those with over twenty full-time employees, more than $5 million in revenue, and a physical office in the U.S.
Government entities: Agencies and publicly traded companies are exempt.
Nonprofits: Charitable organizations that have an IRS tax-exempt status are generally not required to report.
Certain financial institutions: Banks, credit unions, investment companies, and advisors registered with the SEC are exempt.
Public accounting firms: Accounting firms and subsidiaries of exempt entities also qualify for exemptions.

However, many HOAs and condominium associations are not exempt because they are often incorporated as nonprofit corporations under state law but lack IRS tax-exempt status.

Who is a company applicant?

A company applicant refers to the individual who files the official documents to create the entity. This role can be fulfilled by professionals such as lawyers, paralegals, or accountants who are directly involved in the filing process. If multiple individuals contribute to submitting the formation documents, the primary decision-maker overseeing the filing process must also be identified as a company applicant.

It is important to note that FinCEN does not mandate entities established before January 1, 2024, to disclose information about their company applicants. Additionally, no more than two individuals may be designated as company applicants in the reporting process, according to FinCEN guidelines.

Understanding beneficial ownership

Defining a beneficial owner?

A beneficial owner is any individual who:

Owns or controls at least 25% of the entity, either directly or indirectly.
Exercises significant control including influencing major decisions or operational activities of the organization.

A reporting company is not limited in the number of beneficial owners it must disclose.

What constitutes significant control?

Significant control refers to an individual’s ability to direct key aspects of an entity’s operations or governance. Examples include:

Acting as a senior officer.
Having authority to appoint or remove senior officers or board members.
Overseeing financial, strategic, or operational decisions.
Exercising influence through formal or informal agreements or relationships.

FinCEN emphasizes that substantial control can be exercised through various mechanisms, including representation on boards, majority voting power, or indirect control via intermediaries.

Special cases and exceptions

Not all individuals involved with an entity qualify as beneficial owners. For instance:

Minors: Reporting is limited to noting their minor status; additional details must be submitted upon reaching legal adulthood.
Inheritance: Future ownership interests based on inheritance are excluded from reporting.
Nominees: Individuals acting solely as intermediaries or custodians for others may also be exempt.

Entities must identify all beneficial owners who meet these criteria, without imposing a cap on the number of individuals reported.

What information needs to be reported?

If an entity is required to file a BOI report, it must provide specific details about the reporting company and its key individuals. The information to be disclosed includes:

For the reporting entity

The full legal name of the entity, as well as any trade names or “doing business as” (DBA) names.
The current U.S. address where the principal business operations take place. If the main office is outside the U.S., provide the address where it conducts U.S.-based activities.
The jurisdiction where the entity was formed or registered.
A Taxpayer Identification Number (TIN), such as an Employer Identification Number (EIN). For foreign entities that do not have a U.S. TIN, a tax ID number issued by their home country, along with the name of the issuing jurisdiction, is required.

For beneficial owners and company applicants

Each beneficial owner and company applicant must provide:

Full legal name.
Date of birth.
Current residential street address (not a P.O. box). For company applicants filing in a professional capacity, their business address can be reported instead.
A unique identifying number from an acceptable government-issued document, such as a U.S. passport or driver’s license. Alternatively, a FinCEN identifier may be used if already obtained.

Document submissions and updates

Reporting companies must include an image of the document containing the identifying number (e.g., a scan of a driver’s license). If a FinCEN identifier is provided instead, this can replace the need for specific document details.

Whenever changes occur—such as updates to names, addresses, or identifying numbers—entities must submit an updated BOI report within thirty calendar days of the change. If the document associated with an identifying number changes, a new image of the updated document must also be submitted.

Filing requirements and deadlines

How to file a BOI report

BOI reports must be filed electronically through the FinCEN website at: https://fincen.gov/. The process is straightforward:

Gather information: Collect the necessary details about your entity, its beneficial owners, and applicants.
Log into FinCEN: Create an account on their website.
Submit your report: Enter the information accurately and double-check for errors.

Deadlines for filing

Existing entities: Entities created before January 1, 2024, must file their BOI reports by January 1, 2025.
New entities: Entities created on or after January 1, 2024, must file within 30 days of formation.

Failing to meet these deadlines can result in penalties.

Penalties for non-compliance

Non-compliance with the CTA carries severe penalties:

Civil penalties: Up to $500 per day for failing to file on time.
Criminal penalties: Fines of up to $10,000 and/or imprisonment for up to two years.

These penalties emphasize the importance of timely and accurate reporting.

Concerns and challenges for HOAs and small businesses

Privacy concerns

One major concern is the privacy of beneficial owners or board members. The BOI report includes sensitive personal information, which will be stored in a secure database accessible to:

Law enforcement agencies.
Financial institutions (under certain conditions).
Federal agencies investigating crimes.

HOA board members may worry about potential data breaches or misuse of this information.

Administrative burden

HOAs and small businesses often lack the resources to oversee additional administrative tasks. The CTA shifts the responsibility of reporting from financial institutions to entities themselves, increasing workloads and costs.

Impact on board recruitment

For organizations like HOAs and condos, requiring board members to disclose personal information may deter individuals from serving in these roles.

Current legal challenges

The CTA has faced legal opposition. In March 2024, a U.S. District Court declared the law unconstitutional. However, the federal government appealed this decision. As of January 2025, enforcement of the CTA is on hold due to a legal injunction. While this pause provides temporary relief, HOAs and small businesses should prepare for the possibility of the law being reinstated.

Steps to prepare for compliance

1. Understand your entity’s status

Determine whether your HOA or business is subject to the CTA. Review the list of exemptions and consult with legal counsel if needed.

2. Collect required information

Start gathering the necessary details about your beneficial owners and, if applicable, company applicants. Ensure the information is accurate and up to date.

3. Monitor legal updates

Stay informed about the legal status of the CTA. Subscribe to updates from trusted sources or consult with your attorney regularly.

4. Train your board or team

Educate your HOA board or management team on the CTA’s requirements to ensure everyone understands their responsibilities.

5. Consult professionals

Seek guidance from accountants, lawyers, or compliance experts to streamline the reporting process.

Conclusion

The Corporate Transparency Act is a significant step toward improving transparency and preventing financial crimes. While it places new responsibilities on HOAs and small businesses, understanding its requirements and preparing in advance can help you navigate these changes effectively.

As the legal landscape evolves, staying informed and proactive is essential. Always consult with experts, gather your information, and keep an eye on updates to ensure compliance with this important legislation.

Learn how UpperBee can streamline your condo and HOA management tasks today

UpperBee provides a robust, all-in-one software solution designed to help condo and HOA associations take control of their financial management while ensuring transparency and accessibility for all stakeholders. Its comprehensive suite of features streamlines financial planning, including budgeting, assessment collection, and reserve fund management, offering associations the tools needed to make informed decisions and maintain financial health. With UpperBee, boards can easily track income and expenses, forecast future financial needs, and generate clear, professional financial reports that keep homeowners and stakeholders informed.

One of UpperBee’s standout features is its ability to facilitate reserve fund management. The platform enables associations to plan and monitor reserve fund contributions based on data-driven insights, ensuring compliance with local regulations that often require reserve fund studies conducted by professionals. By centralizing financial, UpperBee helps associations avoid funding shortfalls and ensures that major repairs or replacements, are adequately funded.

By integrating financial management with communication tools, UpperBee reduces administrative burdens and enhances stakeholder trust. Associations can operate more efficiently, focusing on long-term planning and community development while keeping homeowners engaged and informed. With its user-friendly interface and comprehensive functionality, UpperBee is the ideal solution for condo and HOA associations aiming to modernize their financial practices and improve transparency.

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Disclaimer: UpperBee is not a law firm, and the information provided in this blog post is for informational purposes only. It should not be considered legal advice. Always consult with your legal advisor before taking any action to ensure compliance with the Corporate Transparency Act or any other laws.