As of January 1, 2024, the Corporate Transparency Act went into effect. Why does this matter for HOAs? Because small businesses—including HOAs that fall under the criteria—will be required to submit a Beneficial Owner Information Report to the US government. This could significantly change HOA bookkeeping policies and procedures for your HOA.

Understanding the implications of this legislation is crucial for HOAs–and HOA bookkeeping–to navigate the new reporting requirements effectively and avoid potential penalties for non-compliance. By staying informed and proactive, HOA boards and management teams can ensure smooth adherence to the Corporate Transparency Act while maintaining the integrity of their financial operations.

In this article, we’ll take a closer look at what the Corporate Transparency Act is, who it affects, and how to remain compliant.

What is BOI Reporting, and What Does it Mean for HOA Bookkeeping?

Beneficial Owner Information (BOI) reporting is a requirement introduced by the Corporate Transparency Act. This act mandates that certain entities, including most HOAs, must report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

For HOA bookkeeping, it’s simply one more step in remaining compliant. PayHOA offers bookkeeping as a service and can help with your HOA bookkeeping needs. 

What is the Corporate Transparency Act?

The Corporate Transparency Act is a federal law aimed at combating money laundering, terrorism financing, and other financial crimes. It requires certain entities, such as corporations, limited liability companies (LLCs), and most HOAs, to disclose information about their beneficial owners to FinCEN.

This information includes the identities of individuals who directly or indirectly own or control the entity and have a significant ownership interest or controlling interest. Beneficial owners are individuals who, either alone or jointly with others, have substantial control over the entity or receive substantial economic benefits from its assets.

What is FinCEN?

FinCEN, or the Financial Crimes Enforcement Network, is a bureau of the U.S. Department of the Treasury. It is responsible for collecting, analyzing, and disseminating financial intelligence to combat money laundering, terrorism financing, and other financial crimes.

Who needs to file BOI reports?

HOAs are among the entities required to file BOI reports under the Corporate Transparency Act. If your HOA has any beneficial owners, you must report this information to FinCEN. HOAs need to maintain accurate and detailed HOA bookkeeping records to ensure compliance with BOI reporting requirements. These records should include information about the association’s financial transactions, ownership structure, and any individuals who qualify as beneficial owners. Keeping meticulous HOA bookkeeping records will facilitate the BOI reporting process and help avoid potential penalties for non-compliance.

When do HOAs need to file BOI reports?

BOI reporting became mandatory for HOAs starting January 1, 2024. It is important for HOAs to ensure compliance with this requirement to avoid potential penalties or legal consequences.  The reporting deadline for HOAs is typically within a certain timeframe after the creation or renewal of their governing documents or when there are changes in their beneficial ownership structure.

Where can HOAs file BOI reports?

HOAs can file BOI reports electronically through the FinCEN website. It is essential to provide accurate and complete information to ensure compliance with the Corporate Transparency Act.

Why is BOI reporting important for HOAs?

BOI reporting is important for HOAs to comply with federal regulations aimed at preventing financial crimes. By disclosing information about beneficial owners, HOAs contribute to greater transparency and accountability in the financial sector.

How can HOAs ensure compliance with BOI reporting requirements?

To ensure compliance with BOI reporting requirements, HOAs should thoroughly review the Corporate Transparency Act and FinCEN guidelines. It may be helpful to seek guidance from legal or financial professionals familiar with these regulations.

For HOAs, compliance with the Corporate Transparency Act may involve updating existing record-keeping practices and implementing new procedures to collect and report information about beneficial owners. It’s essential for HOA boards and management teams to familiarize themselves with the requirements of the Act and take steps to ensure timely and accurate reporting to FinCEN. Failure to comply with the Act’s provisions could result in significant penalties, underscoring the importance of proactive compliance efforts.

Are there exemptions for HOAs?

Yes, there are exemptions for certain HOAs under the Corporate Transparency Act. HOAs with fewer than 20 residential units and annual revenues of less than $5,000 are exempt from BOI reporting requirements. Additionally, HOAs that are already subject to reporting requirements under other federal laws, such as the Home Mortgage Disclosure Act (HMDA) or the Bank Secrecy Act (BSA), may also be exempt from BOI reporting. 

However, it’s essential for HOAs to carefully review the criteria for exemptions and ensure that they meet the eligibility requirements to avoid potential non-compliance issues. If you’re unsure whether your HOA qualifies for an exemption, it’s recommended to seek guidance from legal or financial professionals familiar with the Corporate Transparency Act and its exemptions. In addition, PayHOA offers bookkeeping as a service. Contact customer service for more information. 

How can PayHOA help your HOA with this new legislation?

PayHOA provides bookkeeping as a service that streamlines financial management for HOAs. Our platform simplifies the process of tracking and managing financial transactions, ensuring accuracy and compliance with regulatory requirements. Our team of HOA bookkeeping experts can become a part of your team and handle your bookkeeping needs, as well. 

With PayHOA, HOAs can easily generate reports and documentation required for BOI reporting, saving time and minimizing the risk of errors. Our user-friendly interface makes it simple for HOA boards and management teams to input and update beneficiary owner information, ensuring that all necessary data is readily available for reporting purposes.

Additionally, PayHOA offers customizable features that allow HOAs to adapt their bookkeeping processes to meet their specific needs and preferences. Whether it’s automating routine tasks, generating financial statements, or integrating with other accounting software, PayHOA provides the tools and support necessary to navigate the complexities of the Corporate Transparency Act with confidence.

By leveraging PayHOA’s comprehensive bookkeeping solutions, HOAs can streamline operations, improve financial transparency, and ensure compliance with the Corporate Transparency Act and other regulatory requirements. With PayHOA as their trusted partner for bookkeeping as a service, HOAs can focus on serving their communities while we handle the complexities of financial management and reporting.

Please note: This article aims to offer general information only. It is not intended to serve as legal advice, as the appropriateness of guidance hinges on the specific facts and circumstances of each situation. If you or your HOA have specific questions regarding these laws, it is best to consult with your attorney or legal counsel.