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Application of the Corporate Transparency Act to Homeowners’ Associations and Condominium Associations

Gene R. Abercrombie and Lauren A. Lowe

Man stacking blocks, including one saying compliance.What is the Corporate Transparency Act?

The Corporate Transparency Act (the “CTA”) became effective January 1, 2024, and imposes a reporting obligation on all entities considered to be a “reporting company” The reporting obligation requires, among other things, disclosure of certain beneficial ownership information and details about the reporting company (the “Report”). The purpose of the CTA is to (1) improve transparency and access to information about business entities and their owners and (2) deter criminal activity by reducing the ability of individuals and companies to anonymously control business entities (e.g. to combat money laundering).

Are Homeowners’ Association and Condominium Owners’ Associations reporting companies?

Yes, since Homeowners’ Association or Condominium Owners’ Association (collectively, “Associations”)  are formed by filing Articles of Incorporation with the Ohio Secretary of State.

Are some Associations exempt from reporting under the CTA?

There are several exemptions under the CTA which relieve reporting companies from their reporting obligations. These exemptions generally relate to industries which are already highly regulated, but one exemption is potentially applicable to Associations.  Associations that have filed for and received tax-exempt status under Section 501(c)(4) of the Internal Revenue Code are exempt from reporting. Such status is rare in the context of Associations.  Generally speaking, Associations have limited tax-exempt status under Section 528 of the Internal Revenue Code and are not relieved of their reporting obligations.

Who is a “beneficial owner” of an Association?

Any individual (1) exercising “substantial control” over the Association or (2) who owns 25% or more of the ownership interests of an Association, is a beneficial owner as defined by the CTA.

Any officer should be considered a beneficial owner (e.g. anyone with influence over important decisions made by the Association regarding business structure and activities, finances, and management of assets and budgets). At a minimum, an Association’s President and any other officers should be included in the Report as beneficial owners. The Financial Crimes Enforcement Network, the agency that enforces the CTA, has stated that merely being a member of the Board of Directors (commonly referred to as the Board of Trustees or Board of Managers in the context of Associations’) does not automatically make the individual a beneficial owner. Rather, it is an analysis made on a director-by-director basis. Each Association should review its ByLaws (also known as Code of Regulations) to determine whether or not any one director has the requisite level of control to qualify as a beneficial owner. For example, if an Association’s ByLaws require majority approval from the Board of Directors to take action, no individual director has substantial control, and therefore, no individual director is a beneficial owner. Some Associations are taking a more conservative approach by including all directors in the Report. This depends on each Association’s risk tolerance and ability to manage updates to the Report.

What information must beneficial owners disclose in the Report?

Each beneficial owner must provide: (1) name, date of birth, and address; (2) unique identifying number (e.g. from a driver’s license or passport or other acceptable identification document); (3) the name of the state that issued the driver’s license or identification document; and (4) an image of the driver’s license, passport, or other identification document.

What information about the Association must be disclosed in the Report?

The Association must provide: (1) its legal name; (2) any trade names; (3) current street address of its principal place of business; (4) State of formation; and (5) taxpayer identification number.

How often are updates required to be made to the Report?

The Association must file an updated report within thirty (30) days after any of the information provided in the Report changes. Logistically, the most frequent updates to the Report will include any change of the President or other officer.

Steps to become compliant and maintain compliance.

If you have any questions regarding the CTA or compliance with the CTA, please contact Gene R. Abercrombie, Esq. or Lauren A. Lowe, Esq. at 419-241-6000.


Disclaimer: This alert has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.