HOA Q&A: Does the Corporate Transparency Act apply to residential associations?

Editor’s note: Attorneys at Goede, DeBoest & Cross respond to questions about Florida community association law. The firm represents community associations throughout Florida and focuses on condominium and homeowner association law, real estate law, civil litigation, estate planning and commercial transactions.

Q. I have heard about something called the Corporate Transparency Act. Can you explain it and how it will affect community associations? −D.W., Marco Island

A. In January of 2021, the Corporate Transparency Act (CTA) was signed into federal law. The CTA is intended to increase transparency in corporate entities. The law focuses on for-profit corporations and limited liability companies (LLCs), but non-profit corporations like condominium, cooperative, and homeowners associations are not exempt from its reporting requirements, nor are management companies. There is an effort to make condominium, cooperative, and homeowners associations exempt from the CTA, but for now, they are not.

The purpose of the CTA is to prevent money laundering, terrorist financing, tax evasion, and other illicit activities that small corporate entities are sometimes used to hide. The CTA requires the disclosure of “beneficial ownership,” which refers to the individuals who own or control an entity. The CTA requires corporations, LLCs, and other similar entities to report who their beneficial owners are to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network.

An entity is classified as a “reporting company” if it is created under the laws of a U.S. state by the filing of a document with a secretary of state or similar office under the law of a U.S. state. Most condominium, cooperative, and homeowner associations are formed by the filing of Articles of Incorporation with the Florida Division of Corporations and fall under the reporting company classification.

To comply with the CTA: Report Beneficial Ownership. This includes disclosure of the individuals who exercise substantial control over the organization. For management companies, this includes the management company’s corporate managers; for condominium associations, cooperative and homeowners associations, this would include association Board members. Information Disclosure: Associations and management companies must disclose the name, date of birth, address, and a unique identifying number, such as a Social Security Number or a passport number, of their beneficial owners. Report Changes: Associations and management companies must update any changes in beneficial ownership.

The BOI requirements took effect on Jan. 1, 2024. Condominium associations, cooperative homeowners associations, and management companies must report their initial reports by Jan. 1, 2025. The CTA applies civil and criminal penalties for not reporting or not updating the BOI or providing a false or fraudulent BOI.

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Destiny Goede, Esq., is an Attorney at the Law Firm Goede, DeBoest & Cross. Visit www.gadclaw.com or to ask questions about your issues for future columns, send your inquiry to: question@gadclaw.com. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross, or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.