Corporate Transparency Act Implications for California HOAs

The Corporate Transparency Act (CTA), enacted in 2021, aims to combat financial crimes by requiring organizations to disclose their beneficial owners. While initially targeting businesses engaged in money laundering or terrorist financing, the CTA’s broad scope now includes homeowners associations (HOAs). 

As the act’s full implementation begins in January 2025, California HOAs must take proactive steps to ensure compliance or risk facing severe penalties.

Modernizing HOA Elections in California

HOA elections in California are governed by the Davis-Stirling Common Interest Development Act, which ensures fair and transparent governance. Traditionally, secret ballots were mailed using a double-envelope system to protect voter anonymity. However, recent amendments now allow electronic voting, provided associations formalize rules and appoint California HOA inspectors of elections to oversee the process.

This modernization offers increased flexibility, enabling HOAs to use platforms like ElectionBuddy to manage both electronic and mail-in ballots while maintaining compliance with state requirements. These changes reflect the evolving needs of communities and make participation more accessible for members statewide.

CTA Compliance: What California HOAs Need to Know

The Corporate Transparency Act requires HOAs to report detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Beneficial owners include individuals with significant decision-making authority or ownership of at least 25% of the association’s assets. 

For HOAs, this typically applies to board members and developers with large ownership stakes. Required information includes:

• Full legal names
• Dates of birth
• Social Security numbers
• Current residential addresses
• Valid identification numbers (e.g., driver’s license or passport)

Any changes to this information must be reported to FinCEN within thirty days. Non-compliance carries hefty consequences, including daily fines of up to $500 and potential criminal penalties, such as imprisonment.

Key Deadlines and Legal Challenges

Efforts to exempt HOAs from CTA reporting requirements have been unsuccessful. For instance, in Community Associations Institute (CAI) v. U.S. Department of Treasury, a federal court denied an injunction to delay implementation. As a result, all California HOAs must comply by January 1st, 2025, to avoid penalties.

Who Qualifies as a Beneficial Owner?

Under the CTA, beneficial ownership applies to individuals who significantly influence an organization’s governance. For HOAs, this typically includes:

• Board members with decision-making authority
• Developers holding 25% or more of the association’s assets

Exemptions include:

• Employees without executive roles
• Minors
• Agents, custodians, and intermediaries
• Creditors or those inheriting ownership

By narrowing reporting obligations, the law ensures that only those directly involved in governance are accountable.

The Risks of Non-Compliance

Compliance with the CTA presents unique challenges for volunteer-led HOA boards. Many lack the resources or expertise to manage complex reporting requirements, especially when sensitive personal data is involved. Failure to comply could discourage member participation and complicate future board recruitment.

Given the financial and legal risks of non-compliance with the Corporate Transparency Act for HOAs, it’s essential for California HOAs to develop robust processes for reporting and to seek professional legal and financial guidance. This proactive approach can mitigate risks while simplifying compliance.

Using Zoom for HOA Meetings in California

Virtual platforms like Zoom are transforming HOA governance by offering accessible alternatives to in-person meetings. Using Zoom for HOA meetings in California ensures members can participate in discussions and decision-making, even when physical gatherings are impractical.

The Davis-Stirling Act complements this trend by supporting hybrid voting systems that combine electronic and mail-in ballots. Platforms like ElectionBuddy streamline these processes, providing end-to-end support for election management while ensuring compliance with legal requirements.

Preparing for Compliance

California HOAs can take the following steps to prepare for CTA compliance:

1. Identify beneficial owners, including board members and developers.
2. Gather and verify required personal information.
3. Establish internal systems to track changes and submit updates within thirty days.
4. Seek guidance from legal and financial professionals to ensure accurate reporting.
5. Collaborate with industry associations, such as the Community Associations Institute, to advocate for policy improvements.

Navigating the Future of HOA Governance

The Corporate Transparency Act introduces significant compliance requirements for California HOAs, demanding detailed disclosures about beneficial owners. Combined with the Davis-Stirling Act’s modernization of election procedures, these changes create a more transparent and accessible governance framework.

To navigate this evolving legal landscape, California HOAs must act swiftly to meet reporting deadlines and adopt secure systems for compliance and elections. Platforms like ElectionBuddy provide tailored solutions for HOA elections in California, ensuring both electronic and mail-in ballots meet state and federal standards. By embracing these tools, associations can confidently adapt to new requirements while continuing to serve their communities effectively.