The Corporate Transparency Act (CTA), effective as of January 1, 2024, imposes significant reporting requirements on many Homeowners Associations (HOAs). Aimed at combating financial crimes such as money laundering, the law mandates certain HOAs to disclose detailed board member information to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). Non-compliance carries severe penalties, including daily fines of $500 and potential imprisonment.
While the initial filing deadline was set for January 1, 2025, a court decision has issued a stay, temporarily halting enforcement. This development provides HOAs additional time to prepare but does not eliminate the obligation to comply once the stay is lifted. It remains crucial for boards to stay informed and ready to meet the requirements.
This new requirement has raised concerns across the community management industry, with organizations like the Community Associations Institute (CAI) actively advocating for exemptions for HOAs. However, there are no guarantees of relief before the deadline, leaving boards and managers responsible for ensuring compliance.
Time is running out. Here’s what HOAs need to know—and do—about the CTA.
What is the Corporate Transparency Act?
The CTA is a federal law aimed at increasing financial transparency and preventing illicit activities like money laundering and tax evasion. Under the act, specific HOAs must submit detailed reports containing personal information about:
All board members.
Individuals or entities owning 25% or more of the units within the community.
The information submitted must include a valid government-issued ID and comply with privacy regulations such as the General Data Protection Regulation (GDPR) and other local privacy laws.
Why Boards Need to Act Now
Compliance Is Mandatory
Failing to comply with the CTA could result in:
$500 daily fines until compliance is achieved.
Criminal penalties, including imprisonment.
Potential financial liabilities for the HOA and its management.
Low Awareness Among Boards
Many HOA boards remain unaware of the CTA and its requirements. As managers, it’s crucial to inform boards of their legal obligations and help them take timely action.
Industry Fact:
According to a survey conducted by the CAI in 2023, nearly 60% of HOA boards were unaware of the CTA’s requirements just six months before its effective date.
Key Considerations for Filing
1. Single Report Requirement
HOAs must submit a single report consolidating information from all board members and any qualifying owners. Individual filings are not permitted.
2. Privacy Concerns
Boards must navigate privacy regulations like GDPR and the California Consumer Privacy Act (CCPA) when handling sensitive personal data, including ID images and other private information.
3. Updating Information
Reports must be updated whenever a board member changes or an ID expires, making ongoing compliance a critical consideration.
Filing Options: Pros and Cons
There are three primary methods for HOAs to file their reports:
1. The Board Files Itself
Pros: No external costs.
Cons: High risk of errors and non-compliance. The board is responsible for securely handling personal information and ensuring privacy compliance.
2. Management Files on Behalf of the Board
Pros: Can be positioned as a value-added service for the HOA.
Cons: Management companies may face liability under privacy laws. The process is time-consuming and must be repeated for each ID update or board change.
3. Hiring a Third-Party Filing Service
Pros: Reduces the board’s and management’s liability, offloads administrative tasks, and ensures professional handling of sensitive data.
Cons: Quality of service varies; some providers may lack sufficient security protocols.
Pro Tip: When selecting a third-party provider, look for advanced features like automated updates, ID verification, and strong encryption protocols.
A Streamlined Solution: Hoacta.app for CTA Compliance
Hoacta.app is a purpose-built platform designed by HOA industry professionals to simplify CTA compliance. With a focus on security, accuracy, and ease of use, it offers a reliable solution for filing requirements.
Key Features
1. World-Class Security
High-grade encryption to protect sensitive data.
Compliance with international and federal privacy standards, including GDPR, CCPA, and ISO/IEC 27001.
2. Fraud-Proof Filing
Optical character recognition (OCR) technology verifies ID validity.
Biometric selfie scans ensure only rightful ID owners submit information.
3. Automated Updates
Reminders for board members when IDs are about to expire.
Automatic prompts to update information without restarting the filing process.
4. Comprehensive Management Dashboards
Dashboards allow property managers to track filing progress, ensuring no steps are overlooked.
Industry Fact:
Platforms like Hoacta.app can reduce manual filing errors by 50% or more, according to data from HOA management software providers.
The Clock Is Ticking: Take Action Now
HOA boards must take immediate steps to ensure compliance with the Corporate Transparency Act. Here’s what to do:
1. Inform Your Board
Educate board members about the CTA’s requirements, deadlines, and potential penalties for non-compliance.
2. Choose a Filing Method
Evaluate the pros and cons of self-filing, management involvement, or using a third-party service like Hoacta.app.
3. Start the Filing Process
While the legal battle to exempt HOAs from the Corporate Transparency Act (CTA) continues, there are no guarantees that an exemption will be granted before the January 1, 2025 deadline. To protect your HOA from potential penalties, it’s essential to begin the filing process proactively.
Ensure all required information—including valid government-issued IDs, personal details of board members, and qualifying ownership information—is collected and securely prepared. Submit your report to FinCEN as early as possible to avoid last-minute complications and ensure compliance, regardless of the outcome of the legal proceedings.
Conclusion: Protect Your HOA from Penalties
The CTA introduces significant new responsibilities for HOAs, but compliance doesn’t have to be overwhelming. By acting now, educating your board, and leveraging tools like Hoacta.app, your association can meet its obligations while protecting sensitive data and avoiding costly fines.
Final Thought:
Compliance is not just a legal requirement—it’s a step toward building trust, transparency, and accountability within your HOA. Don’t wait—start the conversation with your board today to ensure a seamless path to compliance.
For more information or to get started with Hoacta.app, contact their team today. Pricing starts at under $200, with discounts for bulk filings.
Author: John S. Morlu II, CPA John S. Morlu II, CPA, is the CEO and Chief Strategist of JS Morlu, a globally acclaimed public accounting and management consulting powerhouse. With his visionary leadership, JS Morlu has redefined industries, pioneering cutting-edge technologies across B2B, B2C, P2P, and B2G landscapes. The firm’s groundbreaking innovations include: • ReckSoft (www.ReckSoft.com): AI-driven reconciliation software revolutionizing financial accuracy and efficiency. • FinovatePro (www.FinovatePro.com): Advanced cloud accounting solutions empowering businesses to thrive in the digital age. • Fixaars (www.fixaars.com): A global handyman platform reshaping service delivery and setting new benchmarks in convenience and reliability. Under his strategic vision, JS Morlu continues to set the gold standard for technological excellence, efficiency, and transformative solutions.
JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being. Talk to us || What our clients says about us
