Compliance Update: What is the Corporate Transparency Act? What Does the Injunction Mean for Condos and Co-ops?

The Corporate Transparency Act (CTA) was passed in 2021 to help curb tax fraud, money laundering, and financing for terrorism. The law was set to take effect in 2024 and required many entities doing business in the United States to report specific information about the individuals who own or control them. This included cooperative corporations, homeowners’ associations, and condominiums.

On December 3, 2024, a preliminary injunction was issued by the U.S. District Court for the Eastern District of Texas, temporarily halting the enforcement of the CTA nationwide and suspending reporting requirements. This injunction was allowed to remain in place by the United States Court of Appeals for the Fifth Circuit and there is no immediate need to file Beneficial Ownership Information (BOI) Reports.

Following that order, the Court of Appeals issued a briefing schedule for the case, which included holding oral arguments on March 25, 2025. This means unless there is a separate interim appeal to lift the injunction, the resumption of the filing requirements will not occur until after the oral arguments, almost three months from now.

FirstService Residential believes that there will be some time before there are any other actions related to the Corporate Transparency Act. That said, we are making recommendations to our boards to be better prepared for any eventuality.

Our legal and compliance experts have answered the most common questions pertaining to CTA compliance and how this injunction affects boards. We will continue to monitor CTA developments and will notify our managed properties in the event that the injunction is lifted, and compliance requirements are reinstated.

*We recommend that all condominium and cooperative boards consult their building attorney on all matters related to compliance, potential liability, and unique legal considerations.
 

What does the injunction mean for condos and co-ops?

• Cooperative and condominium boards can pause on filing BOI reports with FinCEN, at this time.
   
• If already filed, the board has fulfilled its compliance obligation if the injunction is overturned, and the CTA is reinstated.
   
• FinCEN Report has notified FirstService that it does not have any plans to remove any of the data from their system at this time due to the chance that the injunction will be overturned. There is no cost for FinCEN to house the data.
   
• If a board has not filed, but was subject to the CTA, it is our recommendation that the board have the required information to file ready in case the injunction is overturned and the timeline for filing is short.
   
• If the injunction is overturned, FinCEN Report will assume its role in helping you comply with the CTA.
   

Do condo and co-op boards still need to file a BOI Report?

The injunction has paused reporting requirements and CTA enforcement which was set to begin on January 1, 2025. For now, condo and co-op boards do not need to file BOI Reports. There is still a chance this injunction may be overturned.

If you have not filed your report, but were subject to the CTA, FirstService Residential recommends that you have the required information ready to file in case the injunction is overturned. It is unclear if the original deadline to file will be maintained in the event the injunction is overturned.
 

What if my condo/co-op board already filed a BOI Report?

If you have already filed your BOI Report, you have fulfilled your compliance obligation if the injunction is overturned, and the CTA is reinstated. No further action is required at this time.
 

What information was required for condos and co-ops to report?

• The legal name of the property
   
• Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names
   
• The current street address of its principal place of business if that address is in the U.S. (for example, company headquarters). The company address must be a U.S. street address and cannot be a P.O. box
   
• Its jurisdiction of formation or registration (State of Organization) and the date of formation
   
• Its Taxpayer Identification Number
   
• Any beneficial owner

Additional requirements include specifying if the entity is filing an initial report or a correction/update of a prior report.
 

Who is considered a beneficial owner?

A beneficial owner is defined as an individual who either directly or indirectly:

• Exercises substantial control over the association, or
   
• Owns or controls at least 25% of the association’s ownership interests

There is not yet a broad consensus among attorneys whether all board members would have been required to file as beneficial owners. FirstService Residential believes as volunteer board members who work collaboratively, each board member exercises substantial control. By this definition, FirstService recommended that all the board members file as beneficial owners, in addition to sponsors who retain more than a 25% interest.
 

Are condominiums required to submit a BOI report?

Under the CTA, any business entity formed by filing with the Secretary of State was required to file a BOI report. While condominium associations in New York are initially formed via a declaration on land records, they are also required to file with the Secretary of State after formation. Therefore, we recommended that all condominiums file the BOI Report.
 

What information is requested in the BOI Report?

The BOI Report required the following information on each beneficial owner:

• Name
   
• Date of birth
   
• Residential address
   
• An identifying number from an acceptable identification document such as a passport or U.S. driver’s license
   
• The issuing state or jurisdiction of the identification document
   

What was the filing deadline for the BOI Report?

The injunction has halted filing requirements. Originally, filing deadlines were based on when the entity was registered:

• A condo or co-op created or registered to do business before January 1, 2024 had until January 1, 2025, to file its initial BOI report.
   
• A condo or co-op created or registered in 2024 had 90 calendar days to file after receiving actual or public notice that its creation or registration was effective.
   
• A condo or co-op created or registered on or after January 1, 2025, had 30 calendar days to file after receiving actual or public notice that its creation or registration was effective.
   

How often were condos and co-ops required to file a BOI Report?

A report was only required once, but the condo/co-op had to provide updates to the information included in the first report. Even if there was no change in the beneficial owners, updates had to be submitted when the identification documents (i.e., a driver’s license or passport) expired.

There are many steps required to monitor compliance. This is why FirstService recommends that all boards retain a third party for CTA compliance.
 

Were there any penalties associated with not filing or missing the deadlines?

The law originally stated that a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 per day. This amount would have been adjusted annually for inflation, and as of April 2024, was up to $591 per day.

Both individuals and corporate entities could have been held liable for willful violations, including filing (or attempt to file) false information, as well as willfully providing the filer with false information to report.
 

Can a condo/co-op board file on its own, without using a third party?

Any condo/co-op may file on its own through FinCEN’s BOI E-Filing website at no cost. However, there are many steps required to monitor compliance. FirstService recommends that all boards retain a third party for CTA compliance.

FirstService uses FinCEN Report, a third-party filing service, to track document expiration dates, notify beneficial owners, and help our clients complete required filings quickly and efficiently through a secure system.
 

Other legal challenges to CTA requirements

On July 18, 2024, the CAI Board of Trustees approved the filing of a lawsuit against the U.S. Department of Treasury challenging the CTA to exempt and protect community associations (this includes condos and co-ops) from burdensome requirements outlined in the new law. However, given the potential penalties for noncompliance, FirstService recommended erring on the side of caution and filing a BOI report.
 
FirstService, the Real Estate Board of New York (REBNY), and the Council of New York Cooperatives and Condominiums also sought to exempt cooperatives and condominiums from requirements of the CTA.
 

Were any properties exempt from filing?

The CTA had 23 specified exemptions, primarily for entities that filed with other government agencies. The most relevant exemption for residential properties was an exemption for entities that have 20 or more employees and more than $5 million in revenue and receipts. Any condo or co-op that met these requirements was exempt from filing a BOI Report.
 

Who should file in a property with multiple entities?

In the case of a “condop” (a condominium with at least one residential unit owned by a cooperative corporation), FirstService recommended that both the condominium and the cooperative corporation file the BOI Report.

Some properties have a “master board” or a master association of the condominium, and a “residential section board.” FirstService recommended that only the master board of the condominium file the BOI Report.

If a cooperative had a subsidiary entity, FirstService recommended that each separate business entity file a BOI Report.
 

FirstService is prepared to help our managed properties file all BOI Reports as required by the Corporate Transparency Act. Contact our experts today.

 
*We recommend that all condominium and cooperative boards consult their building attorney on all matters related to compliance, potential liability, and unique legal considerations.