Some homeowners’ associations (HOAs) must report information on their beneficial ownership to the Financial Crimes Enforcement Network (FinCEN), according to recent updates to the FAQs page on the agency’s website. FinCEN updated the FAQs on April 18 to add answers to questions regarding which HOAs must file beneficial ownership information (BOI) reports and identifying an association’s beneficial owner.
Under the 2021 Corporate Transparency Act (CTA), certain entities must file BOI reports with FinCEN. Nearly all domestic entities created or registered in 2024 that are subject to the reporting requirements must file a BOI report within 90 calendar days of receiving notice of their creation or registration. Other reporting companies created or registered before Jan 1, 2024, must file by Jan. 1, 2025.
In March, a federal court found the CTA exceeded Congress’s power and barred enforcement of any part of the act against the plaintiffs in the case, a small business owner from Ohio and members of the National Small Business Association (NSBA). The decision was appealed by the government and FinCEN is still requiring entities not involved in the litigation to file reports.
Which HOAs must file reports?
Not all HOAs are incorporated, and those created without filing a document with the secretary of state are not domestic reporting companies. Those HOAs that are incorporated or formed by filing documents with the secretary of state’s office may still qualify for an exemption as a nonprofit or social welfare organization.
While most §501(c)(3) organizations are not required to file BOI reports, the majority of HOAs don’t qualify as §501(c)(3) organizations under IRS rules. However, some HOAs are designated as §501(c)(4) social welfare organizations, which are also exempt from reporting requirements. Any HOA not designated as §501(c)(3) or §501(c)(4) organization must report their BOI to FinCEN.
Who is an HOA’s beneficial owner?
For most reporting companies, the beneficial owner is any individual who directly or indirectly exercises substantial control over the entity or owners, or controls at least 25% of its ownership interests. While it is uncommon for a single individual to own at least 25% of an HOA, FinCEN expects that at least one individual will exercise substantial control over the association. Individuals meeting one or more of the following criteria are considered to exercise substantial control:
- Senior officers
- Has authority to appoint or remove certain officers or a majority of the HOA’s directors
- Is an important decision-maker
- Has any other form of substantial control over the HOA
To learn more about the CTA and filing BOI reports with FinCEN, you can watch our on-demand webinar, which explains step-by-step how to file the reports. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our free 30-day trial.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.