How does this apply to your community?

Given this ruling, Board Members of all homeowner associations, including subdivisions, mixed use, condominium, townhomes, etc. are required to file with the regulating agency, FinCEN by January 1, 2025.  In order to make this process easier for your community and board members, Cagle Pugh is offering to process this filing.  We are also encouraging communities to adopt Bylaw amendments requiring all sitting board members to provide their information for this purpose.  The link to the order forms for these services can be found (here-link to be added).

Can we get exempted by changing our IRS designation?

The Corporate Transparency Act identifies 23 entity types that are exempt from the definition of reporting companies (e.g., SEC-reporting companies, insurance companies, tax-exempt entities, subsidiaries of exempt entities). While most POAs are non-profit, tax-exempt entities, only three types of tax-exempt entities are exempt from filing obligations: 501(c) organizations of the Internal Revenue Code (“IRC”), a political organization as defined under section 527(e)(1) of the IRC, or a trust described under section 4947(a) of the IRC. Importantly, this exemption does not apply to an HOA that is exempt from taxation under section 528 of the IRC.  In other words, to change your designation you may be required to submit the community to a costly homeowner vote.  A tax-exempt community may also find it is required to open its community common spaces to the public while still maintaining financial liability for the facilities.

Do Board Members have to provide financial data?

No, the CTA only requires Board Members to provide identifying government documentation such as driver’s license or a passport.  While the federal government obviously has access to these documents already, the purpose of the CTA is to link those individuals to a particular entity should any malfeasance occur.  Board Members may also opt to acquire their FinCEN ID number on their own through the FinCEN site to avoid having to provide such documents to the association or attorney.  https://fincenid.fincen.gov

What if we don’t file with FinCEN?

Civil penalties of up to $500 for each day that a violation continues or has not been remedied, capped at $10,000. Possible imprisonment of up to 2 years for any person who willfully (1) provides, or attempts to provide, false or fraudulent beneficial ownership information or (2) fails to report complete or updated beneficial ownership information to FinCEN.  As the CTA is only asking for public data, it is highly recommended that communities comply as soon as possible.

What if a Board Member resigns, dies, rolls off?

Any changes to the FinCEN report must be made within 30 days.  Cagle Pugh can also process that amended filing upon notification by the community via our order form (link here).

Should you have the attorney file it?

Given that the potential penalties for failing to comply with the Corporate Transparency Act are much more significant than failing to file an annual report under state law, counsel can gather the appropriate information from the beneficial owners in a secure manner and submit the report after reviewing it to determine compliance with the CTA.