Supplementary Guidance on the Corporate Transparency Act for Illinois Community Associations

NOTE: This article was originally published on May 8, 2024, and updated on July 30, 2024 to clarify the status of board members as “beneficial owners” of the community association and their resulting compliance requirements with the Corporate Transparency Act.

On April 18, 2024, the Financial Crimes Enforcement Network of the U.S. Treasury Department (“FinCEN”) issued supplementary guidance on the Corporate Transparency Act (“CTA”) as part of their FAQs (“FAQs” – available here). The updated FAQs include guidance specifically for community associations, which affirms and is in line with our recent article summarizing what community associations need to know about the CTA (available here). Guidance from the FAQs for community associations (which is consistent with what LP previously reported and opined) is summarized as follows:

1. Community associations are subject to the CTA’s reporting requirements (unless a specific exemption applies). (See FAQs Question C.10). This is because the vast majority of condominium and community associations and co-ops are created by filing a document with the Illinois Secretary of State and file their annual tax returns under Section 528 of the Code, which would not qualify for an exemption from—and are thus subject to—the CTA reporting requirements.
2. Board members who exercise “substantial control” over the Association are “beneficial owners” of their community association under the CTA and, therefore, must report certain information. (See FAQs Question D.13). Per the CTA, a beneficial owner is anyone who (i) exercises “substantial control” over the entity, including Board members. Question D.13 of the FAQs clarifies this obligation for community associations and provides that a beneficial owner includes an individual that (a) “is a senior officer”; (b) “has authority to appoint or remove certain officers or a majority of directors”; (c) “is an important decision-maker”; or (d) “has any other form of substantial control over” the community association. Based on the above, all officers of the Board are beneficial owners and must report, but whether a non-officer Board member exercises “substantial control” and thus is a “beneficial owner” depends on the facts and must be determined on a case-by-case basis.
   • As a reminder, the CTA requires that all beneficial owners must report the following information: (i) the individual’s legal name; (ii) the individual’s birthdate; (iii) the individual’s address (in most cases, a home address); and (iv) an identifying number from a driver’s license, passport, or other approved document, as well as an image of the relevant document. Click here for LP’s general primer on the CTA, including filing requirements.
3. The per day penalty amount for willfully violating the CTA is adjusted for inflation. (See FAQs Question K.2). While not specific to community associations, Question K.2 of the FAQs provides that the penalty of up to $500 per day for “willfully violating” the reporting requirements of the CTA is adjusted for inflation (currently up to $591 per day).
4. Individuals and corporate entities may be held liable for willfully violating the CTA. (See FAQ Question K.3). Question K.3 of the FAQs makes clear that both individuals (board members) and corporate entities (community and condominium associations and co-ops) may be held liable for willful violations of the CTA.

LP is pleased to coordinate CTA filing compliance services for our community association clients. Click here for information on LP’s CTA filing services program. 

LP is committed to keeping our community association clients informed of, and prepared to proactively and successfully navigate, any changes in the law. For questions regarding the CTA, including reporting requirements, or other issues facing your condominium or community association or co-op, please contact Howard Dakoff, Laura Marinelli, Adam Kahn, or Molly Mackey of LP’s Community Association Group.