Updated December 9, 2024

Overview of CTA

The Corporate Transparency Act (“CTA”) is a federal law passed in 2021 to track criminal or terrorist money laundering and safeguard national security and the U.S. financial system.

Applicability to HOAs and Condos in Arizona

Yes, the CTA applies to HOAs and condos in Arizona, with limited exceptions:

  • Associations that are actively tax exempt under Section 501(c)(4) of the Internal Revenue Code; or
  • Associations with more than $5 million in annual gross receipts AND more than 20 full-time employees

Many HOA/condo industry professionals throughout the U.S. do not believe the CTA was intended to apply to HOAs and condos.

Reporting Requirements

HOAs and condos were initially required to report the following information by January 1, 2025:

  • For association: Legal name (and d/b/a), EIN and physical address
  • For all board members: legal names, birthdates, home addresses, and driver’s licenses, state IDs or passport numbers
  • Same information for individuals with substantial control over the association (likely the CEO of the management company)

*Note:  This is an ongoing reporting requirement – any changes, corrections and additions to the filing must occur within 30 days of changes (board elections, board resignations/appointments, changes in management company, etc.)

**Additional Note: Updating or correcting a previously filed report requires the filing of an entirely new report rather than merely adding or subtracting information from the previously filed report.

Recent Developments

  1. Nationwide Injunction: On December 3, 2024, a federal judge in the Eastern District of Texas issued a nationwide injunction against the enforcement of the CTA, suspending the January 1, 2025 deadline for filing beneficial ownership information reports.
  2. Government Appeal: On December 5, 2024, the U.S. Department of Justice filed an appeal to the United States Court of Appeals for the Fifth Circuit against this preliminary injunction.
  3. FinCEN Guidance: FinCEN stated that “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force.” However, voluntary submissions are still accepted.

Considerations

  1. The injunction is temporary, and the situation may evolve rapidly.
  2. The injunction could be stayed, limited in scope, or overturned on appeal, and there is no guarantee that the government’s original 1/1/25 filing deadline would be extended.
  3. If the injunction is lifted or limited, enforcement could resume, potentially with adjusted deadlines.

Recommendations

  1. Associations should maintain readiness for the original CTA reporting requirements.
  2. Associations should stay informed about any statements from FinCEN regarding potential deadline extensions.
  3. Associations should prepare for CTA compliance while monitoring further developments.

Potential Penalties for Noncompliance (if enforced)

  • Civil penalties: $500 per day
  • Criminal penalties: Up to $10,000 and a maximum of 24 months in prison

While the injunction provides temporary relief, it’s crucial for associations to stay prepared and informed about ongoing developments in the CTA enforcement landscape.