The CTA was a 2021 amendment to the Bank Secrecy Act. The CTA intends to better detect suspicious financial activities such as money laundering and terrorist financing in small business entities. The CTA required FinCEN to adopt regulations to implement the CTA, to create the forms that will be required, and procedures for filing them. As of January 1, 2024, those regulations are in effect. The law applies to all foreign and domestic corporations, including nonprofit corporations, except those falling under certain exemptions. Though not intended to regulate community associations, the CTA contains no applicable exemptions for most associations. Thus, nearly all Indiana homeowners associations and condominium associations will be subject to the requirements.

Although just 22 pages long, the CTA was included in a separate 1,500-page federal statute, the 2021 National Defense Authorization Act. That probably accounts for the fact that the applicability of the CTA to homeowners associations "flew under the radar" for a long time. Neither Congress nor the U.S. Treasury Department probably intended the CTA to apply to community associations. However, after a closer review of the CTA's broad language, it is clear to most who deal with community associations that the CTA is applicable.

Unfortunately, not. Although there are many exemptions listed in the CTA for a variety of business entities that are not subject to the reporting requirements discussed below, there are none that apply to a typical Indiana HOA. If an Indiana community association was created as a nonprofit corporation with Articles of Incorporation filed with the Indiana Secretary of State, that association is required to file the Beneficial Ownership Information reports discussed below. Generally, a community association is not subject to the CTA only if (1) it is truly a "tax-exempt" organization (which VERY few community associations are) or (2) it has more than $5 million in gross revenues AND 20 or more full-time employees.

Any entity that is covered by the CTA must file "Beneficial Ownership Information" ("BOI") reports with FinCen as well as a report for the community association itself.

A simple glance at the term "Beneficial Owner" would not strike a person as meaning the members of an association's Board of Directors. However, when the definition of the phrase "Beneficial Owner" is included in the federal regulations, it is clear that HOA Board members ARE included. A Beneficial Owner is an individual who, directly or indirectly, through a contract, arrangement, understanding relationship, or otherwise (i) exercises "substantial control" over the entity, or (ii) owns or controls 25 percent or more of the ownership interests of the entity. In our firm's opinion, all of the members of a community association's Board of Directors plus its Officers fall within the purview of the above criteria and are therefore subject to the reporting requirements of the CTA.

"Substantial control" is defined in the regulations. We believe that based on those definitions, each member of a typical Board of Directors "has substantial" control, even if a Board member is not an Officer of an association. If an Indiana community association hires a property management company that handles the day-to-day functions, the Board members still have "substantial control" and should not take the position that the management company absolves the Board members from the reporting requirements.

There are two registrants under the CTA. The first is the "reporting company," which is the community association itself. The information that must be filed includes:

(a) The legal name of the association.

(b) The "trade name", if any, of the association. This would apply to an association that “does business as” (i.e., a DBA) a different name.

(c) The principal office address of the association.

(d) The name and address of the association's Registered Agent on file with the Secretary of State.

(e) The state in which the association was formed.

(f) The association's taxpayer identification number.

The second category of registrants applies to the "Beneficial Owners". A report will need to be filed for every such "Beneficial Owner". Thus, every Board member and Officer will need to provide the following information:

(a) Full legal name.

(b) Date of birth.

(c) Current residential address.

(d) At the time of initial reporting, a unique identifying number from a current driver's license, an unexpired passport, or a state-issued identification card, including an "image" (most likely, a PDF) of that document. (After that initial filing, a FinCEN identifier number will be created that can be used later to expedite the filing process.)

Go to BOI E-FILING (fincen.gov) which is FinCEN's online filing system. You will have the choice of either filing a BOI report through the completion of a PDF, printing it, scanning it, and then uploading it, OR you can file directly online.

For a community association that was in existence before December 31, 2023, the initial BOI reports must be filed with FinCEN before December 31, 2024. For a community association that is created in 2024, the deadline to register with FinCEN is 90 days after creation. Any reporting company formed or registered on or after January 1, 2025, is required to make an initial report to FinCEN within 30 days of formation.

After the initial registration, an association will have 30 days to file any changes. That means if there is a new director appointed or elected, there are 30 days for that person’s BOI report to be filed with FinCEN. This will be one of the most challenging reporting requirements since the 30-day deadline would "start to tick" when (a) an association's annual meeting results in one or more new Board members, (b) a Board member resigns or dies and the Board appoints a replacement, (c) a Board member is removed from the Board and a replacement is elected, or (d) a Board member sells his or her home and the Board appoints a replacement. Boards must therefore be prepared to act promptly whenever there are any changes.

We recommend waiting until the fourth quarter of this year to file anything. We see no benefit at all in submitting reports before that. Right now, there is an intense lobbying effort in Washington, D.C. by groups including the Community Associations Institute to either delay the CTA's implementation of reporting requirements or to create a new, clearly defined exemption for community associations. Hopefully, those lobbying efforts will be successful.

Another reason to delay filing is because of a federal lawsuit filed in Alabama. On March 1st, a District Court Judge ruled that the CTA was unconstitutional and ordered the federal government to stop enforcement of the CTA. That ruling is not likely applicable in Indiana, and an appeal is inevitable. However, it is still a hopeful sign that the CTA’s implications on Indiana community associations will eventually be reduced if not eliminated.

Penalties for non-compliance can be severe. Civil penalties can be $500 per day during a period of noncompliance. A "willful violation" is a federal felony subject to more substantial fines and up to two years imprisonment. Thus, the CTA cannot be ignored.

In the February 4, 2024 issue of the Indianapolis Star, USA Today reported on a study done by the Identity Theft Resource Center, which noted that in 2023, there was a 78% increase in data compromises compared to 2022. In 2023, they reported there were also more than 353 million victims of identity theft. With such data breaches widely reported in the media, many individuals may be reluctant to upload their personal identifying information to a government website. Thus, it is possible that the CTA could stifle volunteerism in communities. Additionally, what are the implications of a director refusing to cooperate? Our firm will be exploring these questions as the year progresses.