Noncompliance with the requirements under the Corporate Transparency Act can carry a hefty BOI penalty. Reporting companies, which can include homeowners associations, should be aware of the potential consequences ahead of time.
Understanding CTA Requirements and BOI Penalty
The Corporate Transparency Act, enacted in 2021, went into effect on January 1, 2024. Under this law, companies that meet certain criteria must file a Beneficial Ownership Information report with FinCEN. This report should include information about the company itself, its beneficial owner/s, and its company applicant/s.
For reporting companies created or registered before January 1, 2024, the deadline for filing an initial BOI report is January 1, 2025.
Meanwhile, reporting companies that were created or registered after January 1, 2024, but before January 1, 2025, must file their initial BOI report within 90 calendar days of receiving actual or public notice of the company’s creation or registration.
Lastly, reporting companies that are created or registered after January 1, 2025, must file their initial BOI report within 30 calendar days of receiving actual or public notice of the company’s creation or registration.
If any changes are made to the company’s information or beneficial owner/s, reporting companies must file an updated report within 30 days after the date of the change.
Homeowners associations that meet the criteria of a reporting company must adhere to these requirements. Otherwise, they can face a BOI reporting penalty.
But what is the penalty for beneficial ownership filing anyway?
What Is the Penalty for Non-Compliance With Beneficial Ownership?
FinCEN understands that the new requirements under the CTA can be difficult to get used to. As such, FinCEN allows reporting companies to correct an error or omission within 90 days of the deadline for the original report without incurring penalties.
However, the agency is making every effort to educate reporting companies and make sure they know their obligations to file, update, or correct a BOI report. What are the main consequences of non-compliance? Civil and criminal penalties await if you disregard the requirement to report Beneficial Ownership Information.
What is the Fine for Not Filing a BOI?
There are a few potential penalties for BOI reporting violations. According to the CTA, willful violation of the requirements could result in civil penalties of up to $500 per day. However, this adjusts every year to account for inflation. As of writing, the adjusted civil penalty is $591 per day.
Additionally, willful violation of the reporting requirements under the CTA could carry criminal penalties of up to $10,000 in fines and up to two years imprisonment. Potential violations include the willful failure to file a BOI report, the willful filing of incorrect BOI, and the willful failure to correct or update a prior BOI report.
Can HOAs Face BOI Penalty?
Yes. Homeowners associations who meet the criteria for reporting companies must adhere to BOI reporting requirements. Willful violation of these requirements can result in the same civil and criminal penalties for HOAs.
Who Can Be Held Liable for BOI Violations?
FinCEN can hold both individuals and corporate entities liable for willfully violating BOI reporting requirements. This can include a person who tries to file or actually files incorrect information with the agency. However, it can also include anyone who intentionally provides false information to the filer for reporting.
Additionally, individuals and corporate entities can also be held liable for the willful failure to report complete or updated BOI. In these instances, FinCEN can hold individuals liable if they either cause the failure or serve as a senior officer at the reporting company when the failure happened.
An individual who files a report on a reporting company’s behalf can also be held liable for willfully filing false information. The same goes for a beneficial owner or company applicant who refuses to provide the necessary information to a reporting company.
Responsibility of Reporting Company to Provide Accurate Information
The reporting company is responsible for identifying its beneficial owners and company applicants and reporting these individuals to FinCEN.
When a reporting company files its BOI report, it must certify that it provided true, correct, and complete information. As such, FinCEN expects reporting companies to do their due diligence in verifying the information they obtain from beneficial owners and company applicants before filing their BOI report.
What to Do If a Beneficial Owner or Company Applicant Withholds Information
Beneficial owners and company applicants are the ones who will provide their information to the reporting company. However, that does not mean the reporting company holds no liability. FinCEN holds reporting companies responsible for ensuring that the information they submit is accurate and complete.
Therefore, FinCEN recommends that existing reporting companies take the necessary steps to educate beneficial owners and company applicants. Reporting companies should explain the requirements involved in BOI reporting and obtain the required information. Additionally, reporting companies should put internal mechanisms in place to ensure that beneficial owners report any changes.
Keep in mind that beneficial owners and company applicants can incur civil and criminal penalties if they willfully cause a reporting company to fail to file a complete or updated report.
The Purpose of the Corporate Transparency Act
The Corporate Transparency Act aims to protect U.S. national security and financial systems by making it more difficult for bad actors to conceal their identities and commit illicit activity. In line with this, the CTA has put in place certain BOI reporting requirements. Of course, with strict requirements come strict consequences. If reporting companies, including HOAs, wish to avoid Corporate Transparency Act penalties, they should ensure compliance.
One worry that many reporting companies share is data security. Accordingly, FinCEN published the Beneficial Ownership Information Access and Safeguards rule, which details regulations and protocols concerning access and controls over reported information.
Avoid Penalties with Proper Filing and Compliance
Clearly, there is a heavy BOI penalty for willful violations of the Corporate Transparency Act. Violators can potentially face a penalty of up to $500 per day, up to $10,000 in criminal fines, and up to two years imprisonment. Fortunately, HOAs, in particular, can easily avoid these penalties with the help of HOAfiling.com.
HOAfiling.com is an online platform that simplifies BOI reporting and updating. With us, you won’t miss a deadline!
