June 19, 2023

After another client contacted us inquiring about the Corporate Transparency Act (CTA), we thought it was time to write a brief summary on this law and what it means to community associations.

The CTA was enacted by the United States Congress on January 1, 2021. The stated purpose of the law is to generally address “the disclosure of corporate ownership and the prevention of money laundering and the financing of terrorism”. I know, you’re asking – how in the world does this apply to community associations? The simple answer is, it wasn’t really intended to, and community associations appear to be “stuck in the middle” of it (as is often the case). A *very* brief summary and discussion about the CTA is below.

1. The CTA mandates the creation of a database of “Beneficial Ownership Information” (BOI) for “Reporting Companies”.
2. It appears that associations are “Reporting Companies”, for the most part.
3. The exemptions listed in the CTA do not appear to apply.
4. It appears that as of now, Board members would qualify as “Beneficial Owners” under the CTA because in their capacity as Board members (or the governing body as a whole), they exercise “substantial control” over the association as a Reporting Company.
5. Reporting Companies must provide general information (name, address, tax ID, formation info, etc.) as well as specific information on each Beneficial Owner (i.e., Board member) – name, DL or passport, DOB, etc.
6. A failure to report may result in civil fines and/or criminal fines for fraudulent reporting or a purposeful failure to report.

Based upon our review of the current iteration of the CTA and agency Rule(s) related to same, we believe that the vast majority of Pennsylvania community associations (especially those registered as a non-profit corporation with the PA Department of State) will likely be subject to the law, as it currently stands. But don’t panic, we still have some time to figure this out – the filing requirement becomes effective on January 1, 2024 (and the report must be filed by 1/1/25 for existing Reporting Companies).

We will continue to monitor the CTA and will update the Hoffman Law Blog as soon as we learn any new information.

– Edward Hoffman, Jr., Esq. CCAL