Homeowners associations rely on management companies to help with tax filings and legal compliance. But what about the newly enacted Corporate Transparency Act? What are the HOA management company’s roles and responsibilities regarding filing? Let’s discuss everything you should know about HOA management company BOI reporting.
HOA Management Company BOI Reporting: Your Responsibility
Homeowners association management companies play a crucial role in the filing process. After all, legal compliance is a part of a management company’s standard services. HOA management company BOI reporting should be a top priority for businesses that help planned communities.
What are the roles of an HOA management company in the reporting? Here are the general responsibilities you need to keep in mind:
- Assist with Reporting. HOA managers can assist their communities by helping them identify the beneficial owners. They can also help the board collect and verify information to ensure they are accurate and updated.
- Filing Reports. HOA management companies can file the BOI reports with FinCEN on the community’s behalf. They must ensure that the reports are accurate and complete to avoid issues.
With the new filing requirements, HOA management companies can add a new revenue stream to their business model. They can provide comprehensive CTA compliance services by taking care of the entire reporting process for their HOAs.
Who is Required to File a HOA BOI Report?
To reduce money laundering and shell company misuse, the Corporate Transparency Act (CTA) was passed and took effect on January 1, 2024. Homeowners associations, like many other organizations, now have to file information on their beneficial owners and company applicants with the Financial Crimes Enforcement Network (FinCEN).
Every HOA, whether incorporated or unincorporated, must file this information with FinCEN as long as the HOA has filed its documents with the Secretary of State. The only exception is if the HOA is exempt under Section 501(c) of the Tax Code.
When it comes to the associations themselves, the following information must be submitted to FinCEN by the deadline:
- Complete legal name
- Trade name or “doing business as” name
- Present United States address
- Jurisdiction of Formation
- Taxpayer Identification Number (TIN)
- Employer Identification Number (EIN)
As for their company applicants and beneficial owners, homeowners associations must submit the following information:
- Complete legal names
- Birthdates
- Complete present addresses
- Distinct identifying numbers and the issuing jurisdiction from one of the records (none of which can be expired):
- United States passport
- State-issued driver’s license
- Identification document issued by the local government, state, or Indian Tribe
- Foreign passport (if none of the previous documents are available)
- A photo of the document with the distinct identifying number
Who are Beneficial Owners?
According to FinCEN, the beneficial owners of a homeowners association include anyone who directly or indirectly has significant control over the association. It also includes any person who holds 25% of the interests within the community (i.e., someone who owns 25% of the properties within an HOA). FinCEN also included the following people in its list of beneficial owners for homeowners associations:
- Senior officers
- People with the authority to designate or remove a majority of HOA directors or certain HOA officers
- Important decision-makers
- People who have any form of significant control over the association
According to the definition, homeowners association board members are beneficial owners. Generally, property managers may not be considered beneficial owners within an HOA unless they own 25% of the association’s properties. Moreover, these managers often act under the direction of the board, so they may not wield significant control over the HOA.
When Should You File the BOI Report?
HOA management companies should stay on top of FinCEN’s deadlines. If an HOA you handle was established before January 1, 2024, you must file the requirements by January 1, 2025. However, if you work with an HOA that was made on or after January 1, 2024, then you should help them file the report within 90 days of establishment.
In the future, if your company works with HOAs established on or after January 1, 2025, you will need to help them file their initial report within 30 days after the HOA is formed. HOA management companies must also update their BOI reports within 30 days if any changes occur (e.g. if a recent election has changed the board members).
What are the Consequences of Non-Compliance?
The Corporate Transparency Act levies hefty penalties on violators. Those who miss the deadline may face civil penalties of $500 daily. Meanwhile, wilful violations can cost up to $10,000 in criminal penalties and up to 2 years in prison.
HOA management companies must stay on top of the filing requirements, ensure that all of their communities meet the deadline, and ensure that all of the information submitted is correct and up-to-date. Missing deadlines or making errors could erode good working relationships and even lead to lawsuits.
The Best Way to File BOI Reports
As an HOA management company, it’s important to identify and keep track of all the beneficial owners of your communities. Your company must compile all the information and submit the initial reports with FinCEN. However, while getting past the initial reporting is the first step, the CTA’s requirements have long-term implications for management companies.
Most homeowners associations hold yearly elections to change the board members. This means that each year, HOAs must file updates to their BOI reports within 30 days of an election. This can be challenging if you already handle hundreds of communities at once.
The solution? A reliable third-party platform like HOAfilings.com. Our company provides a useful tool to streamline your reporting process. We can help you organize all the information and provide reminders for when they need to be updated.
Best of all, our platform allows you to manage the information of several HOAs so you won’t lose track. HOA management company BOI reporting becomes a breeze with us!
