Community associations must take seriously new mandatory filing requirements under the Corporate Transparency Act (CTA), community association legal experts were told this week.
Ronald Barba, an attorney with Bender, Anderson & Barba in North Haven, Conn., urged community associations to be proactive and begin the process now to meet their obligations and prevent severe penalties. Barba spoke during a Jan. 31 CAI webinar on the CTA.
Even though the information required under the new law is relatively straightforward, it has sensitive components, legal experts said during the webinar. Barba recommended boards carefully read the instructions and gather all information together before filling out the online form. In addition, Barba advised associations to have professionals fill out and file the necessary forms to ensure accuracy and compliance.
Barba said the U.S. Department of the Treasury, which is responsible for administering the CTA, will be strict and there will be substantial penalties for noncompliance including fines up to $250,000 and jail time.
Existing associations must comply with CTA’s reporting requirements by Jan. 1, 2025. New associations have 30 days after incorporation to file. Information must also be updated following changes in governance such as the election of directors.
The CTA was enacted to address international money laundering activities. However, the law impacts most any entity created through a filing with a secretary of state or corporate commission such as community associations. Reporting entities must provide yearly details to the treasury department’s Financial Crimes Enforcement Network.
Although it’s still too early to know the ultimate impact of CTA on community association governance, it may have a chilling effect on volunteerism, Todd Sinkins, an attorney with Rees Broome in Tysons Corner, Va., said during the webinar. He recommended being transparent with potential board candidates about the need to provide personal information under the new law.
An obscure loophole found in the tax code that has been floated as a possible way to dodge CTA requirements is too risky to use right now, adds Sinkins, a fellow in CAI’s College of Community Association Lawyers.
CAI doesn’t believe the CTA 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. Visit Action Center (votervoice.net)
CAI also has asked U.S. Treasury Secretary Janet Yellen to exempt community associations from CTA filing requirements.
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