Beneficial Ownership Information Report: Do I have to file it?

Q: I am the secretary of the board of directors of a homeowners association. Our management company is telling us that we have to file the Beneficial Ownership Information report required by the U.S. Treasury Department. We are a not-for-profit entity, and the board are volunteers. Is this really required by the U.S. Treasury?

A: If your management company is telling you to file the form, we suspect that they are correct and you should file it. Beginning earlier this year, the United States government began accepting reports regarding the beneficial ownership of companies. The purpose of the Corporate Transparency Act is to curb illicit finance — in short money laundering.

The reporting requirements aren’t complicated but require companies to report who owns and controls them. So, if you own more than 25 percent of a company, you are required to document your ownership. There are certain reporting exceptions but the reporting covers just about all companies.

Beneficial Ownership Information Report: Exemptions

Again, you’re asking about a homeowner’s association and we’re addressing your issue alone. For anybody else wondering whether they need to file a report, please review the Beneficial Ownership Information section at fincen.gov/boi.

You’d think that the government might have exempted condominium and homeowner associations in their work. We haven’t discovered that exemption. There are 23 exemptions listed on the FinCen website but none would exempt condominium or homeowners associations.

The best we could find was a statement on the FinCen website that says that certain homeowner associations that are recognized by the Internal Revenue Service as 501(c)(4) social welfare organizations may be exempt from filing.

Certain Associations May Be Exempt From Filing Beneficial Ownership Information Reports

Also, informal associations that do not have a corporate charter issued by a state are likely not required to file a report. For example, this might include a group of homes that together make up an association through an easement agreement but are not a formal association and are not incorporated with the state in which they are located.

A quick internet search found that there have been some lawsuits filed to try to get condominium and homeowners associations exempted. We haven’t seen any that have been successful so far.

We assume that your association is incorporated, but as with many homeowner and condominium associations, we suspect you are a not-for-profit corporation. Having said that, we don’t know if you have the IRS 501(c)(4) social welfare organization designation.

If You’re Required to File, You Should

Given where things stand, the easiest course of action would be to follow your management company’s advice and file. It’s not difficult and doesn’t take too much time. However, if you really don’t want to file, you’ll need to look into it further: find out more about your association, its tax status and filings, and then determine whether you are exempt from filing. Your association attorney may also have some thoughts on the matter.

Ilyce Glink is the author of 100 Questions Every First-Time Home Buyer Should Ask (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.