Although many concluded that the Corporate Transparency Act (“CTA”) applies to homeowners associations, we now have verification of this. On April 18, 2024, the Financial Crimes Enforcement Network (“FinCen”) issued 16 new FAQs and updated two more. Under Category C, question C.10 of the FAQs, a Q&A was added confirming that CTA requirements apply to most homeowners’ associations in the country.
According to FinCen, because the term “reporting companies” includes corporations, and almost all associations are set up as nonprofit corporations, they fall within the parameters of the CTA requirements. The specific Q&A reads as follows:
Q. Are homeowners associations reporting companies?
A. It depends. Homeowners associations (HOAs) can take different corporate forms. As with any entity, if an HOA was not created by the filing of a document with a secretary of state or similar office, then it is not a domestic reporting company. An incorporated HOA or other HOA that was created by such a filing also may qualify for an exemption from the reporting requirements. For example, HOAs designated as 501(c)(4) social welfare organizations may qualify for the tax-exempt entity exemption. An incorporated HOA that is not designated as a 501(c)(4) organization, however, may fall within the reporting company definition and therefore be required to report BOI to FinCEN.
Although the above is not a new revelation for homeowners’ associations, it does solidify what many in the industry were afraid of. Associations were not casualties of war that were accidentally swept into the CTA by virtue of being corporations; instead, FinCen deliberately included HOAs as entities subject to the CTA reporting criteria.
Given the above, make sure your association is ready to comply with the registration requirements no later than December 31, 2024.
Please contact an Altitude attorney, at 303.432.9999 or at [email protected] with questions about the CTA.