New deadline set for transparency act compliance
On Feb. 18, a federal judge lifted the stay in Smith v. U.S. Department of the Treasury, effectively reversing the nationwide injunction that prevented the government from enforcing the Federal Corporate Transparency Act.
Due to this court decision, the beneficial ownership information, also known as BOI, reporting requirements under the CTA are back in effect. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network, also known as FinCEN, issued an updated statement on Feb. 19, extending the filing deadline by 30 days to March 21, for most reporting companies, including community associations.
The compliance landscape for the Corporate Transparency Act has seen significant whiplash, with legal battles causing multiple shifts in enforcement and deadlines. Community association board members who have not yet filed their initial BOI reports, as well as those with changes to report from their initial filing, should plan to comply with the March 21 deadline.
Immediately following the court’s decision, FinCEN issued the following statement (in part) on fincen.gov/boi concerning the new deadline:
“With the February 18, 2025, decision by the U.S. District Court for the Eastern District of Texas in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.), beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are once again back in effect. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025 [to March 21, 2025]. Notably, in keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.
“FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.
“FinCEN will provide an update before then of any further modifications of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.
“For more information, see FinCEN Notice, FIN-2025-CTA1, FinCEN Extends Beneficial Ownership Information Reporting Deadline by 30 Days; Announces Intention to Revise Reporting Rule (February 18, 2025).”
The community association industry is strenuously pursuing the federal government to exempt community associations from this filing requirement. Until then, community association boards can utilize a third-party (typically, a community association attorney or possibly their management company) to report their beneficial ownership information directly to FinCEN. However, it can be performed at no charge, using FinCEN’s E-Filing system available at boiefiling.fincen.gov. More information is available at fincen.gov/boi.
Background on the Corporate Transparency Act
In early 2024, the U.S. Federal Trade Commission revealed that U.S. citizens lost $10 billion to scams in 2023. Over $750 million of these losses were attributed to “business impostors,” or scams where fraudsters posed as legitimate businesses utilizing fraudulent schemes and false identities. To address this risk, the federal government introduced the Corporate Transparency Act enforced by the Financial Crimes Enforcement Network.
The CTA mandates that certain businesses (including not-for-profit corporations such as community associations) disclose ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. The primary goals of the CTA are to increase business transparency and accountability in an effort to prevent illegal financial activities such as fraud, money laundering, and tax evasion.
Under the CTA, current board members of almost all community associations are considered “beneficial owners.” Therefore, such association board members must provide FinCEN with personal information, including their legal name, date of birth, residential address and a copy of a valid, unexpired government-issued identification (Social Security numbers or other personal financial information is not required). Penalties for noncompliance, whether intentional or not, could result in severe penalties, including daily fines over $500, penalties up to $10,000, and up to two years in prison. Community Association boards with questions regarding the CTA should contact their association counsel.
• Matthew Moodhe is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.