The Corporate Transparency Act is alive and kicking and requiring all community associations that are registered as entities with Arizona's Corporation Commission...
United States Criminal Law
To print this article, all you need is to be registered or login on Mondaq.com.

The Corporate Transparency Act (CTA) is alive and kicking and requiring all community associations that are registered as entities with Arizona's Corporation Commission (likely as a nonprofit corporation) to report their Beneficial Ownership Information (BOI) with the United States Department of the Treasury Financial Crimes Enforcement Network (FinCEN). All community associations in existence prior to January 1, 2024 must report their BOI by January 1, 2025.

CTA, BOI, FinCen: What are these and why do they matter to your community association?

The CTA is a federal law adopted to combat financial crimes such as money laundering, embezzlement, bribery, tax evasion, identity theft, etc., along with the proliferation of anonymous business entities (e.g., shell corporations) that may be used for such financial crimes. When a financial crime occurs, FinCEN steps in to "follow the money" to the individual(s) ultimately responsible for the crime. With anonymous business entities, finding the responsible individual can be nearly impossible. Thus, the CTA was born.

The CTA requires an individual to be linked to every entity (with some exceptions). This individual is known as the Beneficial Owner, and community associations must report information on their Beneficial Owners to FinCEN.

Who is a Beneficial Owner?

A Beneficial Owner is any individual (a natural person, not another entity) who, either directly or indirectly, exercises substantial control over the community association, or who owns or controls 25% or more of the ownership interests in the community association. At a bare minimum, the board president is a Beneficial Owner, and a community association must report the board president's BOI to FinCEN. There is some debate in the community association world as to who is considered a Beneficial Owner. The conservative approach is to include all directors because it is generally the board as a whole, and not individual directors, who make decisions on behalf of the community association, but some argue that only the board president's BOI must be reported to FinCEN.

What information needs to be reported?

The BOI that a community association must report includes the following for each Beneficial Owner:

  • Full legal name.
  • Date of birth.
  • Residential street address.
  • Unique identifying number from one of the following nonexpired documents issued to the Beneficial Owner:
    • a US passport issued by the US government;
    • a state, local government, or Indian tribal identification document issued for the purpose of identifying the individual;
    • a state-issued driver's license; or
    • if an individual does not have any of the above-listed documents, a passport issued to them by a foreign government.
  • An image of the identification document (as described above) from which the unique identification number was obtained.

Keep in mind that the federal government already has (or should have) this information on every United States citizen. The CTA is intended to link this individual information to the entities that the individual controls.

How is the information reported?

FinCEN has created an online e-filing system for purposes of reporting BOI: File the Beneficial Ownership Information Report (BOIR)

Simply complete the online form, upload an image of the identification document, and click submit. Once a community association submits its initial BOI report, it need not submit any supplemental reports unless and until the Beneficial Owner changes. This means that supplemental reports must be submitted (i) if the individual serving as board president changes; (ii) if new individuals are elected to the board; and (iii) if new individuals are appointed to the board following the resignation or removal of another director. Any updates must be completed within 30 days of the change.

You can also view a sample of the Beneficial Ownership Information Report (PDF Download) (view only, not for submission).

What if my community association board does not submit any BOI?

The CTA prescribes penalties for failing to report BOI. Failing to report BOI can lead to civil and criminal penalties, including a maximum penalty of $500 per day (up to $10,000) and imprisonment for up to two years. The penalties not only apply to the community association that fails to report BOI, but may also apply to any individual (such as a board president who refuses to provide BOI) who causes a community association not to report, or who is a senior officer of the community association at the time of its failure to report or update BOI.

Originally published March 26, 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More