Community associations must take seriously new mandatory filing requirements under the Corporate Transparency Act, legal experts advise.

Ronald Barba, an attorney with Bender, Anderson & Barba in North Haven, Conn., urges community associations to be proactive and begin the process now to meet their obligations and prevent severe penalties. Barba presented during CAI’s recent webinar, The Corporate Transparency Act: Everything To Know To Ensure Compliance (now available on demand).

Even though the information required under the new law is relatively straightforward, it has sensitive components, legal experts say. Barba recommends boards carefully read the instructions and gather all information together before filling out the online form. In addition, Barba advises associations to have professionals fill out and file the necessary forms to ensure accuracy and compliance.

Barba says the U.S. Department of the Treasury, which is responsible for administering the law, will be strict, and there will be substantial penalties for noncompliance including fines up to $250,000 and jail time.

Existing community associations must comply with the law’s reporting requirements by Jan. 1, 2025. New community associations have 30 days after incorporation to file. Information also must be updated following changes in governance such as the election of directors.

The Corporate Transparency Act was enacted to address international money laundering activities. However, the law impacts most entities including community associations. Reporting entities must provide beneficial ownership information yearly to the treasury department’s Financial Crimes Enforcement Network. Required details includes board members’ and directors’ personal information.

Although it’s still too early to know the ultimate impact of the law on community association governance, it may have a chilling effect on volunteerism, says Todd Sinkins, an attorney with Rees Broome in Tysons Corner, Va., and a fellow in CAI’s College of Community Association Lawyers. He recommends being transparent with potential board candidates about the need to provide personal information under the new law.

CAI doesn’t believe the law was intended to include community associations. Currently, it is seeking an extension of the filing deadline to give communities more time to process the wide-ranging implications of the law. In December, the U.S. House of Representatives passed a bill that would extend the filing deadline. Companion legislation is now before the U.S. Senate. For more information, visit CAI’s Action Center.

CAI also has asked U.S. Treasury Secretary Janet Yellen to exempt community associations from the law’s filing requirements.

>>CAI is developing a guidance document for communities that will be available soon. Read more about the Corporate Transparency Act from CAI’s advocacy team.

>>Visit the beneficial ownership information page from the Financial Crimes Enforcement Network for more details on filing.

The Corporate Transparency Act: Everything to Know to Ensure Compliance

CAI members: $69

Corporate Transparency Act requirements became effective Jan. 1, forcing many community association officers and directors to register with the Department of Treasury’s Financial Crimes Enforcement Network. Watch CAI’s on-demand webinar to learn who must register, whether certain associations are exempt from compliance, and the information that must be provided. Presenters also discuss the consequences for those who fail to or refuse to register.

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