New Information on the Corporate Transparency Act and Community Associations

By Richard S. Ekimoto, Esq.

A couple of days ago, on April 18, 2024, FinCen updated its FAQ to add two provisions about community associations. It states:

C.10. Are homeowners associations reporting companies?
It depends. Homeowners associations (HOAs) can take different corporate forms.
As with any entity, if an HOA was not created by the filing of a document with a
secretary of state or similar office, then it is not a domestic reporting company. An
incorporated HOA or other HOA that was created by such a filing also may qualify
for an exemption from the reporting requirements. For example, HOAs designated
as 501(c)(4) social welfare organizations may qualify for the tax-exempt entity
exemption. An incorporated HOA that is not designated as a 501(c)(4) organization,
however, may fall within the reporting company definition and therefore be required
to report BOI to FinCEN.
[Issued April 18, 2024]

Beneficial Ownership Information Frequently Asked Questions C.10.

The statement makes it clear that an incorporated community association can be a reporting company if it doesn’t fall under one of the exemptions. It is an indication that an unincorporated association is not a reporting company. We had questioned whether the recording of an association’s declaration with the Bureau of Conveyances constitutes a filing with an office similar to the Secretary of State. The FAQ doesn’t expressly address that issue, but it certainly provides some hope that an unincorporated association doesn’t have to file a BOI Report with FinCen. At this point, if you’re an unincorporated association, it may make sense to wait on filing a BOI Report.

The other addition to the FAQ by FinCen relating to community associations is about who is a beneficial owner for the association. It states:

D.13. Who is the beneficial owner of a homeowners association?
A homeowners association (HOA) that meets the reporting company definition and
does not qualify for any exemptions must report its beneficial owner(s). A beneficial
owner is any individual who, directly or indirectly, exercises substantial control
over a reporting company, or owns or controls at least 25 percent of the ownership
interests of a reporting company.
There may be instances in which no individuals own or control at least 25 percent of
the ownership interests of an HOA that is a reporting company. However, FinCEN
expects that at least one individual exercises substantial control over each reporting
company. Individuals who meet one of the following criteria are considered to
exercise substantial control over the HOA

• the individual is a senior officer;
• the individual has authority to appoint or remove certain officers or a
  majority of directors of the HOA;
• the individual is an important decision-maker; or
• the individual has any other form of substantial control over the HOA

[Issued April 18, 2024]

Beneficial Ownership Information Frequently Asked Questions D.13.

Unfortunately, this FAQ doesn’t add any information to what was known about Beneficial Owners for community associations that we didn’t already know.