Important update: December 24, 2024
In early December 2024, the U.S. District Court for Eastern Texas ordered a temporarily hold on the requirement for businesses to report Beneficial Ownership Information (BOI) under the Corporate Transparency Act (CTA). On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit overturned this order.
In order to give businesses time to comply with the law, the reporting deadline has been extended to January 13, 2025.
What is the Corporate Transparency Act?
The CTA is changing the way businesses handle beneficial ownership reporting. The first reporting deadline is now January 13, 2025 (applicable to businesses formed before January 1, 2024). By that time, property management business owners should be ready to go.
If you’d like to get started filing right away, you can use the BOI E-Filing System or check out these FinCEN small business resources.
Of course, you’re not alone in this journey. To get you the best information possible, we spoke to Joe Riter, senior manager of public policy at the National Apartment Association’s (NAA) Government Affairs department.
“Most people wouldn’t know about this law unless they’re tracking updates in the Federal Register, which most small businesses don’t do. Our role is to help ensure NAA members are informed and aware of their responsibilities,” said Joe.
As things stand today, the CTA is being challenged in court. This article covers where that leaves you and what you can do to avoid penalties.
The bottom line: protect yourself from costly penalties by ensuring compliance with the Corporate Transparency Act and FinCEN’s BOI reporting requirements. For businesses formed before January 1, 2024, compliance will ensure you avoid fines of $591 per violation per day (subject to inflation).
How the CTA works
Starting January 1, 2024, most businesses have been required to disclose information about their BOI to the Financial Crimes Enforcement Network (FinCEN). The goal of the law is to combat illegal activities such as money laundering, terrorist activity, tax evasion, etc.
Why the CTA was created
“The Corporate Transparency Act was designed to combat money laundering and transnational crime,” said Joe. “The aim is to prevent criminal organizations from using small business structures to ‘park’ money in assets that can quickly be liquidated.”
The CTA aims to increase transparency by requiring businesses to report details about their beneficial owners. Beneficial owners are individuals who own or control at least 25% of a company or have significant influence over its operations. Reporting requirements include personal information such as names, birth dates and residential addresses.
If your business was formed before January 1, 2024, you’ll have until January 13, 2025, to submit this information. Companies formed after January 1, 2024, must report within 90 days of formation.
Why compliance can be tricky
Many property management businesses have complex ownership structures that can make reporting tricky. Non-compliance may lead to steep penalties, including fines and criminal liability.
In fact, businesses that do not file updated ownership information by January 13, 2025, will be subject to $500 per violation per day, adjusted for inflation. For companies with multiple LLCs, those penalties can multiply.
For property management companies, these rules aren’t just about avoiding penalties — they’re about accountability. To uphold industry trust and transparency, it matters that your business takes steps to be in line with federal regulations.
3 steps property management companies can take
To navigate the new BOI rules with a little more clarity, consider the following:
- Most multifamily properties fall under the rules. Review your business structures to determine if you’re required to file under the CTA. Some entities, such as large operating companies, are typically exempt because they already meet federal disclosure requirements under other laws.
- Gather the necessary details about beneficial owners now. This includes full legal name, date of birth, addresses and identification information.
- Smaller operators might need to hire legal counsel. It can be expensive, but legal professionals can guide you through any questions or complexities. At the end of the day, they’re going to keep you out of trouble, so it’s worth the cost.
How long does it take to report ownership information?
So, how much time is this going to take you? According to Joe, “It depends.”
And that’s exactly why property management companies need to get on top of it sooner rather than later.
Joe told us that for companies with an organized corporate structure and someone dedicated to handling compliance, the process might only take 20 minutes. For smaller independent rental owners, gathering the necessary documentation could take hours or even days.
What if someone isn’t sure what to do next?
Joe is clear on this point. He told us, “If someone is concerned about meeting the deadline, they should immediately contact whoever manages their business affairs, such as a business manager or an attorney.”
Legal developments
The future of the Corporate Transparency Act may someday be decided by the Supreme Court of the United States. Even so, that could be years away. As of March 1, 2024, most companie have been required to comply with the new BOI reporting regulations. Members of the National Small Business Association are exempt, as are a few others.
How NAA can help property management companies
The National Apartment Association (NAA) offers this BOI webinar to help property management companies understand and comply with these changes.
Watch this NAA video for a detailed breakdown of the law. Please note that some important dates have changed since the recording was made.
Disclaimer
As senior manager of public policy with NAA, Joe Riter analyzes and comments on federal, state and local regulations that impact the rental housing industry, and helps support state and local affiliates by monitoring trends and providing resources.
We hope you enjoyed this post, which is for general information purposes only. The opinions, analysis and commentary expressed are not and cannot be relied on as legal advice, and do not necessarily reflect the views of Yardi Systems, Inc. or any of its affiliates. Be sure to consult with a qualified legal or compliance professional when navigating the CTA and any other legal and regulatory requirements that may pertain to you or your business.
