CTA Impact on Community Associations
A Legal Moment
Deadline for Community Association Reporting Under the Corporate Transparency Act Approaches

   The Act, which applies to most incorporated community associations, requires initial and ongoing disclosure of "beneficial ownership."

   While my law partner’s post in December discussed the Corporate Transparency Act (CTA) generally, this post focuses on whether the CTA will impact community associations specifically.  The short answer to that question is:  “probably.

  The federal Corporate Transparency Act (CTA) generally applies to incorporated community associations, meaning that such associations are required to report information related to their “beneficial ownership.” 
   Noting outright that I am not a tax lawyer and this post should not be considered tax advice, whether associations are required to report appears to turn on which tax code section of the Internal Revenue Code the association uses to claim its tax-exempt status:  § 501(c) or § 528.  While community associations have used both, § 528 is the much more common approach of the two. 
   The distinction is important because the CTA expressly exempts § 501(c) corporations from having to report while the same is not true for organizations claiming their exempt status under § 528.
   Assuming an association is covered by the Act, it constitutes a “reporting company” required to provide information about each of its “beneficial owners” on a so-called Beneficial Ownership Information Report,” including such things as each beneficial owner’s name, address and date of birth. In addition, the beneficial owner must provide either a passport, driver’s license or other state identification. 

   And strange as it may sound, each director on a community association board is deemed to be a “beneficial owner” of an association not by virtue of his or her property ownership, but because he or she exercises “substantial control” over the “reporting company” through his or her leadership role.
   For associations formed after January 1, 2024, the deadline by which they must file their report is 30 days after formation; for all other incorporated associations the deadline is January 1, 2025. 

   Keep in mind that this information will then need to be updated as the composition of the Association leadership changes.
   All of that said, association leaders might not want to rush to report in the hope that the IRS or Congress itself loosens its requirements or expands its exemptions.  After all, community associations are hardly a hotbed of the types of financial crimes being targeted by the CTA itself.
   On the other hand, it would be risky to ignore the reporting requirement altogether because the penalty for doing so can result in fines as high as $500 per day.

   You can learn more about the CTA at this website.



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Philip Roth is a founding shareholder at Marshall, Roth & Gregory, PC. One of the firm's principal litigators, Philip's practice involves myriad issues involving community associations.

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