Understanding the Corporate Transparency Act: What it means for your condo or co-op

Maybe you’ve heard of one of the state’s newest legislations, the Corporate Transparency Act (CTA). Did you know it also impacts condos and co-ops? We’ll dive into what the CTA is and why it matters to your building.‍

Understanding the Corporate Transparency Act

The Corporate Transparency Act is a new federal law aimed at making financial dealings more open and stopping illegal activities such as money laundering and tax evasion.

The CTA requires over 2 million businesses, including most condos and co-ops, to report who really owns or controls them to a government agency called the Financial Crimes Enforcement Network (FinCEN). This applies to all board members and any owner with more than 25% ownership in the entire building. The new law includes a strict timeline for the initial report and subsequently a very stringent update process for any change in ownership or board members. ‍

Why the CTA matters to your condo or co-op‍

You might be wondering how a federal financial transparency regulation affects your building. Here's why it's crucial:

1. Legal obligation: In a recent clarification, FinCEN noted that all HOAs, condos, and coops that don’t fall within the normal exceptions are required to file -  unless FinCEN provides an additional update or clarification as they were petitioned to. The only plausible exception that applies to condos and coops is having more than $5M in revenue and more than 20 employees. 
2. Severe penalties: Non-compliance can result in daily fines of up to $500 (a maximum of $10,000) and, in extreme cases, imprisonment for up to 24 months.
3. Financial implications: The potential fines for not complying could really hurt your building's finances.
4. Personal liability: Board members could face personal legal consequences for not following the rules, including personal fines and possible criminal charges.
5. Operational changes: The CTA brings new reporting requirements and deadlines that will change how your building handles some of its business.
6. Increased responsibility: Board members and management must now be more vigilant about tracking and reporting ownership information.‍

How should boards tackle the CTA?

The corporate transparency act filing isn't difficult to file, but given the high stakes associated with the Corporate Transparency Act, and the more frequent turnaround of board members, we’d highly advise working with a professional - whether your property management company or an accountant. Here's why:

1. Expertise in compliance: The CTA introduces new, specific reporting requirements that demand a thorough understanding of the regulation.
   
   
2. Time-sensitive reporting: There’s a narrow 30-day window to file amended reports after any change in board membership. Missing this deadline could result in substantial daily fines. The first filing should be submitted before 1/1/2025.
   
   
3. Accuracy is crucial: Incorrect filings could lead to penalties. Professional assistance ensures that all information is accurately reported.
   
   
4. Ongoing monitoring: Unlike annual compliance tasks, the CTA requires continuous attention to changes in board members.
   
   
5. Risk mitigation: Professional handling of CTA compliance helps protect both the building and individual board members from potential legal and financial risks.‍

Conclusion ‍

The Corporate Transparency Act brings big changes in how the government oversees the way co-ops and condos are set up and run. While it does introduce new responsibilities and costs, it's important to approach this change with a focus on protecting your building's interests and ensuring full compliance with the regulation.

At Daisy, we're here to answer your questions, address your concerns, and ensure that your condo or co-op remains fully compliant with the CTA. By working together, we can navigate these new requirements effectively, minimizing risks and ensuring we keep your building well-run, healthy, and compliant.