Compliance Update: What is the Corporate Transparency Act? What are the Requirements for Condos and Co-ops?

The Corporate Transparency Act (CTA) was passed in 2021 to help curb tax fraud, money laundering, and financing for terrorism. The law came into effect in 2024 and requires many entities doing business in the United States to report specific information about the individuals who own or control them. Under the current definition of the law, this includes cooperative corporations, homeowners’ associations, and condominiums.

Before the end of 2024, residential boards will need to file a Beneficial Ownership Information (BOI) report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. Failure to comply can result in substantial fines that accumulate daily.

Our legal and compliance experts have answered the most common questions pertaining to CTA compliance.

*We recommend that all condominium and cooperative boards consult their building attorney on all matters related to compliance, potential liability, and unique legal considerations.
   

What information does a condo or co-op need to report?

• The legal name of the property
   
• Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names
   
• The current street address of its principal place of business if that address is in the U.S. (for example, company headquarters). The company address must be a U.S. street address and cannot be a P.O. box
   
• Its jurisdiction of formation or registration (State of Organization) and the date of formation
   
• Its Taxpayer Identification Number
   
• Any beneficial owner

The report must also specify if the entity is filing an initial report or a correction/update of a prior report.
 

Who is considered a beneficial owner?

A beneficial owner is defined as an individual who either directly or indirectly:

• Exercises substantial control over the association, or
   
• Owns or controls at least 25% of the association’s ownership interests

There is not yet a broad consensus among attorneys if all board members are required to file as beneficial owners. FirstService Residential believes as volunteer board members who work collaboratively, each board member exercises substantial control. By this definition, FirstService recommends that all the board members file as beneficial owners, in addition to sponsors who retain more than a 25% interest.
 

Are condominiums required to submit a BOI report?

Under the CTA, any business entity formed by filing with the Secretary of State must file a BOI report. While condominium associations in New York are initially formed via a declaration on land records, they are also required to file with the Secretary of State after formation. Therefore, we recommend that all condominiums file the BOI Report.
 

What information is requested in the BOI Report?

The BOI Report must include the following information on each beneficial owner:

• Name
   
• Date of birth
   
• Residential address
   
• An identifying number from an acceptable identification document such as a passport or U.S. driver’s license
   
• The issuing state or jurisdiction of the identification document
   

What is the filing deadline for the BOI Report?

A condo or co-op created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.

A condo or co-op created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.

A condo or co-op created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
 

How often must condos and co-ops file a BOI Report?

A report is only required once, but the condo/co-op must provide updates to the information included in the first report. Even if there is no change in the beneficial owners, updates must be submitted when the identification documents (i.e., a driver’s license or passport) expire.

There are many steps required to monitor compliance. This is why FirstService recommends that all boards retain a third-party for CTA compliance.
 

Are there any penalties associated with not filing or missing the deadlines?

The law originally stated that a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 per day. This amount has been adjusted annually for inflation, and as of April 2024, is up to $591 per day.

Both individuals and corporate entities can be held liable for willful violations. This can include individuals who file (or attempt to file) false information, as well as anyone who willfully provides the filer with false information to report.
 

Can a condo/co-op board file on its own, without using a third party?

Any condo/co-op may file on its own through FinCEN’s BOI E-Filing website at no cost. However, there are many steps required to monitor compliance and the penalties can easily balloon. FirstService recommends that all boards retain a third-party for CTA compliance.

FirstService uses FinCEN Report, a third-party filing service, to track document expiration dates, notify beneficial owners, and help our clients complete required filings quickly and efficiently through a secure system.
 

Legal Challenges to CTA requirements

On July 18, 2024, the CAI Board of Trustees approved the filing of a lawsuit against the U.S. Department of Treasury challenging the CTA to exempt and protect community associations (this includes condos and co-ops) from burdensome requirements outlined in the new law. However, given the potential penalties for noncompliance, FirstService recommends erring on the side of caution and filing a BOI report.
 
FirstService, the Real Estate Board of New York (REBNY), and the Council of New York Cooperatives and Condominiums have also sought to exempt cooperatives and condominiums from requirements of the CTA.

"While CAI and our industry are working diligently to exempt cooperatives and condominiums, the law as it is currently written requires compliance. With less than four months to complete the registration, it is imperative to start the process now."

— Ben Kirschenbaum, General Counsel | FirstService Residential New York 

 

Are any properties exempt from filing?

The CTA has 23 specified exemptions, primarily for entities that file with other government agencies. The most relevant exemption for residential properties is an exemption for entities that have 20 or more employees and more than $5 million in revenue and receipts. Any condo or co-op that meets these requirements is exempt from filing a BOI Report.
 

Who should file in a property with multiple entities?

In the case of a “condop” (a condominium with at least one residential unit owned by a cooperative corporation), FirstService recommends that both the condominium and the cooperative corporation file the BOI Report.

Some properties have a “master board” or a master association of the condominium, and a “residential section board.” FirstService recommends that only the master board of the condominium file the BOI Report.

If a cooperative has a subsidiary entity, FirstService recommends that each separate business entity file a BOI Report.
 

FirstService is prepared to help our managed properties file all BOI Reports as required by the Corporate Transparency Act. Contact our experts today.

 
*We recommend that all condominium and cooperative boards consult their building attorney on all matters related to compliance, potential liability, and unique legal considerations.