On December 11, 2020, Congress passed the Corporate Transparency Act ("CTA") as part of the National Defense Authorization Act for 2021. After years of rule-making, the CTA finally went into effect on January 1, 2024. The CTA, and the associated regulations, require companies formed or operating in the United States to file a beneficial ownership report with the Financial Crimes Enforcement Network ("FinCEN") of the U.S. Treasury Department through the Beneficial Ownership Secure System, aptly referred to as "BOSS". For general information on the CTA, please see our previous postings on the topic at this link.
The CTA requires a "reporting company" to register through BOSS. The CTA defines a "reporting company" as "a corporation, limited liability company, or other similar entity that is created by the filing of a document with a secretary of state or similar office under the law of a State of Indian Tribe[.]" While the CTA contains an exemption for tax-exempt entities, the entity must be described in Internal Revenue Code ("IRC") Section 501(c) (which would include most public charities commonly referred to as 501(c)(3) corporations), and the entity must have applied for and received recognition from the IRS as being exempt from taxation under Internal Revenue Code Section 501(a) . Without recognition from the IRS as being tax-exempt under IRC Section 501(a), a Missouri nonprofit corporation is required to register under the CTA.
Most Missouri homeowners associations ("HOAs") and condominium owners associations ("COAs") are organized as nonprofit corporations, and while they may enjoy special tax treatment under IRC Section 528, most have not applied for, and may not be eligible for, recognition as a tax-exempt entity under IRC Section 501(a). Therefore, unless and until they seek tax-exempt status from the IRS, they are required to register with the CTA by reporting their "beneficial owners."
Notably, a minority of Missouri HOAs are organized as trusts, rather than nonprofit corporations. Those HOAs are not required to report their beneficial owners through BOSS, because they are not a "reporting company."
Next week, we will discuss who qualifies as a "beneficial owner."
Learn more about the CTA and its potential implications for your HOA or COA by visiting our Corporate Transparency Act Resource Center.
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