What Community Associations Need to Know
As you may be aware, in an effort to enhance corporate transparency and combat money laundering, tax fraud, and other illicit activity, Congress passed The Corporate Transparency Act (CTA) in 2021. The CTA will be enforced by the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury.
CAI’s Lawsuit
In June 2024, the CAI Board of Trustees approved filing a lawsuit to exempt community associations from the Corporate Transparency Act. Click here for more information about CAI’s lawsuit.
CAI is pursuing this case in the U.S. District Court for the Eastern District of Virginia because CAI is incorporated in the District of Columbia and headquartered in Virginia. Additionally, the Eastern district is known for having a rapid docket process that allows it to hear cases more quickly than other federal courts and offers the potential for a faster resolution. However, CAI cautions community associations to be prepared to comply with the CTA and file the required beneficial ownership information by December 31, 2024 in order to avoid potential penalties and ensure they meet all legal requirements if the lawsuit is not resolved or the law has not been amended. More information can be found on CAI’s CTA FAQ page .
H.R. 9045
The Corporate Transparency Act exempts non-profits that hold an IRS non-profit tax determination. Community associations are generally incorporated as a local state non-profit corporation; however, these associations generally do not have an IRS non-profit tax determination (i.e., 501c).
On July 15, 2024, H.R. 9045 was introduced seeking to exempt community associations from the requirements of the Corporate Transparency Act. CAI requests concerned individuals contact their Member of Congress urging them to support H.R. 9045, even if they have done so already about the Corporate Transparency Act.
H.R. 9045 is in the first stage of the legislative process which typically entails: consideration by committee, then if approved in committee, sent on to the House as a whole to approve. Once the House approves a bill it is sent to the Senate for committee review and approval. Only when a bill is passed by both the House and the Senate can it be presented to the President for signature into law.
Reporting Requirements
Starting January 1, 2024, associations incorporated with the Secretary of State before 2024, having less than $5 million in gross receipts and fewer than 20 full-time employees, must file information online with FinCEN by January 1, 2025. An exemption also exists for communities classified as 501(c)(4) organizations. Associations created or registered after January 1, 2024, but before January 1, 2025, will have 90 calendar days from their creation/registration to file their initial reports.
Community associations must report the identity of individuals with substantial control, which in most situations is the Board of Directors. Failure to comply can result in significant civil and criminal fines and penalties.
While this is a federal regulation, CAI-CLAC is committed to providing access to CAI resources California community associations can use to educate themselves about their obligations under the CTA.
If you have any questions and concerns about your community association’s obligations under the CTA, please speak with your community association legal counsel.
For additional information and updates please click below.
Our 2024 priority bills continue to make their way through the legislature. You can view each bill and the status below. Make sure to subscribe here for industry updates and legislation impacting community associations delivered straight to your inbox!
