If your entity was created by the filing of a document with the secretary of state, including coops, HOAs and maybe condominiums, the federal government is requiring the reporting of personal identifiable information about certain of their beneficial owners. It’s called the Corporate Transparency Act (“CTA”) and the reporting is to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The filing can be done electronically and the failure to do so has harsh penalties that coop, HOA and condo boards must avoid.

Reporting entities in existence prior to January 1, 2024, must file their initial report by December 31, 2024. So existing coop, HOA and condo boards have a year to report. Reporting entities created on or after January 1, 2024, but before January 1, 2025, will have 90 days to file their initial report. Any Reporting entity created on or after January 1, 2025, will have 30 days to file the initial report. FinCEN’s guidance and regulations are evolving and we would hope that FinCEN will provide further guidance as to whether coops, HOAs and condos must file and comply with the CTA.

The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information, may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of a reporting entity who fail to file a required beneficial ownership interest report may be held accountable for that failure.

Because New York coops and HOAs were created by the filing of a document with the secretary of state they are required to file and comply with the CTA. If a condo board is incorporated, it will be required to file and comply with the CTA as well, but it is not yet clear whether condos which are unincorporated associations in New York are required to file and comply. The safe bet is file and comply for now, but condo boards can wait for now until FinCEN provides some guidance.

Reporting requires the following: a) disclosures about its beneficial owners (as defined by the CTA); b) information about the reporting entity; and c) a certification that its report is true, correct, and complete.

Updated or corrected reports must be filed within 30 days of any change of information previously submitted to FinCEN about the beneficial owners or the reporting entity. 

The issue with community association entities that are required to report under the CTA is who are the beneficial owners that have to give personal information about themselves.

 Under the CTA, a beneficial owner is any individual who, directly or indirectly, either exercises substantial control over the reporting entity or owns or controls at least 25% of the ownership interests of a reporting entity. The regulation provides three specific indicators to determine if an individual has “substantial control:”

1. The individual serves as a senior officer of a reporting entity; or
2. The individual has authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body) of a reporting entity; or
3. The individual directs, determines, decides, or has substantial influence over important decisions made by a reporting entity.

Beneficial owners of coops, HOAs and condos will likely include the following:

1. Directors, managers, and certain key officers (as identified pursuant to the CTA) of the coop/HOA/condo;
2. Shareholders/members/unit owners who own 25% or more of the shares/common interest in the coop, HOA or condo; and
3. Sponsors of coops/HOAs/condos who remain in control of the entity or have at least 25% ownership therein.

Each beneficial owner must provide the following information in the filing with the FinCEN:

1. Full legal name;
2. Date of birth;
3. Residential street address; and
4. Unique identifying number contained in:
   • a valid passport,
   • government or tribal identification document, or
   • state-issued driver’s license. If an individual has none of these forms of identification, then a valid foreign passport may be used.

The unique identifying number must be accompanied by the name of the issuing jurisdiction and an image of the document from which the number was obtained.

Reporting entities must provide the following information about the entity:

1. Full legal name, as well as any trade or d/b/a names;
2. Street address for the principal place of business, if it is in the United States or the primary U.S. location where business is conducted;
3. Jurisdiction of formation for both foreign and domestic companies as well as the state or tribal jurisdiction where a foreign company first registers; and
4. TIN, such as an Employer Identification Number.

In navigating the evolving landscape of FinCEN guidelines, reporting entities must prioritize compliance with beneficial ownership reporting requirements. Staying informed, adhering to specified timelines, and ensuring accurate information submission are imperative to mitigate the risk of penalties. As FinCEN continues to refine its regulations, entities, including coops, HOAs, and condo boards, should remain vigilant for further guidance regarding whether they are covered by the CTA and their reporting obligations.