As the year-end deadline for compliance with the Corporate Transparency Act approaches, boards of cooperatives, condominiums and Homeowners Associations should be aware of the requirements that may affect them.
The CTA requires business entities to report key information about their beneficial owners to the Financial Crimes Enforcement Network of the U.S. Treasury Department (FinCEN) by December 31, 2024.
Initially, there were questions as to whether the CTA applied to condominiums, while it was relatively clear it that applied to cooperatives. In a July 2024 letter, FinCEN said it was considering exempting certain housing companies owned by unit owners, but no formal exemption has been announced.
Co-ops, Condos and HOAs Must Comply
Unless and until FinCEN issues an exemption, co-ops, condos and HOAs must assume that the law applies to them unless their entity qualifies for an existing exemption.
There are 21 exemptions, but the only one that might apply to a cooperative or condominium is the exemption for businesses with more than 20 full-time employees and more than $5 million in annual gross receipts.
Deadline Is Approaching
The CTA was enacted a few years ago, but its requirements for most companies take effect at the end of this year. The purpose of the law is to combat money laundering and corruption by requiring most businesses to identify and provide information about their beneficial owners.
The law requires that most companies disclose to FinCEN information on the company and its beneficial owners along with annual reports of those who own more than 25% or have substantial control. This initial report is due by December 31, 2024.
The term “beneficial owners,” as used in the law, would include all members of co-op, condo and HOA boards because it is defined to include any individual who exercises “substantial control” over the company. Since the board makes all decisions in regard to governance, we believe all board members would have to register.
Therefore, as soon as possible, every board should discuss with its management how it will file its FinCEN reports.
Next Steps
Fox Rothschild cannot be responsible for such filings, as it requires a new report every time there is a change in the board. Therefore, the task of reporting should be with management, or the board itself, or a third party hired to make the initial report and keep a regular, ongoing log of those whose who are on the board.
For a more in-depth discussion of the CTA, see the recent alert from Fox Rothschild’s Corporate Department. Keep in mind that it was not prepared for cooperative or condominiums, but rather for traditional corporations throughout the United States.
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