Corporate Transparency Act Compliance Required for Most Associations


Richard Williamson, San Lorenzo & Stadium Lofts Community Associations


Starting January 1, 2024, many associations are required to comply with the Corporate Transparency Act (CTA) which revised the Bank Secrecy Act and is enforced by the U.S. Treasury’s Fi- nancial Crimes Enforcement Network (FinCEN) (fincen.gov/boi).


The amended law requires small businesses – including most non-profit community associations to file their Beneficial Own- ers’ Information (BOI) prior to Jan. 1, 2025. The BOI reporting requirement is intended to enhance the ability of FinCEN – an agency of the US Treasury -- and other agencies to protect U.S. national security and financial system from illicit use and pro- vide essential information to national security, intelligence, and law enforcement agencies to help prevent drug traffickers and others from laundering or hiding money and other assets in the United States.


CAI-National has reported that the consensus among commu- nity association lawyers is incorporated associations will be impacted by this new law and will have a responsibility to file information with FinCEN in accordance with the BOI reporting requirements. Associations may require legal counsel support in completing BOI documents for submittal unless Congress amends the Act to exclude community associations.


Certified Public Accountant (CPA) firms have been advised by the American Institute of CPAs (AICPA) not to offer advice or complete the CTA documentation as it puts them at an in- creased risk of liability. AICPA reported that CPAs have a limited authority to “interpret” tax law under Title 26 of the U.S. Internal Revenue Code via Treasury Circular 230 and state accountancy statutes. AICPA stated that “Providing technical or interpretive advice on CTA may rise to the practice of law.”


Some associations that are classified as 501(c)(4), may be ex- empt from the new requirements. The U.S. Internal Revenue Code section 501(c)(4) provides for the exemption of two very different types of organizations with their own distinct qualifica- tion requirements. This should be confirmed with association legal counsel.


What information is actually required of associations? The BOI reporting form requires the legal name of the as- sociation, taxpayer ID number, state of incorporation, and current address. Reporting companies are required to iden- tify all individuals who exercise substantial control over the company. A beneficial owner is defined as any individual


14 March | April 2024


who, directly or indirectly, exercises substantial control over a reporting company.


For all individuals who exercise substantial control of expendi- tures and investments, this information is similar to that which is required to establish association bank accounts, investment accounts, and bi-annual California statement of information (SI- 100) forms. At a minimum, the board president and treasurer’s name, address, and either state issued driver’s license or U.S. Passport number are required. Additional board members that exercise control over funds expenditures or investments could also be required to provide information. Changes, corrections, and additions to the filing must occur within 30 days of when board members or community managers become aware of the change (i.e., board member is replaced).


If these requirements look familiar, that may be because they expand upon Section 326 of the USA PATRIOT Act Customer Identification Program’s proof of identity requirements for checking, savings, and investment accounts – both personal and association. Board members, such as the president and treasurer, should already be signatories to operating, reserve, and investment accounts with these ID requirements. Bank and investing accounts require an individual’s social security account number. The BOI report does not.


Reporting companies created or registered before January 1, 2024, will have until January 1, 2025, to file their initial BOI re- ports with FinCEN on its secure e-file system. Associations and their management companies must make the initial filing and any subsequent updates in a timely manner. Filing and updates should be reported to the board of directors and recorded in meeting minutes to document compliance. Failure to file could result in civil penalties of $500 per day, criminal penalties of up to $10,000, and up to 24 months in prison. Updates are easy to make online when conditions change.


FinCEN released Version 1.1 of the Small Entity Compliance Guide in December 2023 that explains requirements for com- pliance. The document is located in the Small Business Re- sources section on the FinCEN website fincen.gov/boi.


—Richard Williamson is Treasurer for the San Lorenzo Community and Secretary for the Stadium Lofts Community associations. In his career, he served as a program manager and development planner for the U.S. Defense Department.


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