Legal action continues over Corporate Transparency Act’s reach

The Corporate Transparency Act is a federal law enacted to combat money laundering, terrorist financing and other illicit activities. It requires corporations, limited liability companies and similar entities to disclose information about ownership to the Department of Treasury’s Financial Crimes Enforcement Network.

The Anti-Money Laundering/Corporate Transparency Act, enacted in 2021, requires entities to report business ownership information yearly to the Department of Treasury or face strict penalties. Community associations, also known as homeowners associations, condominium associations and housing cooperatives, account for more than 365,000 nonprofit, local and volunteer-driven organizations throughout the United States. CAI believes that community associations should be deemed exempt from compliance with the act, and that FinCEN’s interpretation of the CTA unfairly includes community associations under the act’senforcement umbrella.

Community associations that hold an active 501(c)(4) IRS tax exemption are already exempt from filing. In addition, community associations with more than $5 million in annual revenue and 20 or more employees qualify under the current exemptions.

In his letter, Skiba says:

On Oct. 24, a motion for preliminary injunction was denied. The injunction was sought to postpone the deadline for community associations to comply with the act’s burdensome requirements until the case could be fully heard by the court. As a result of the ruling, community associations are still required to comply with the act’s requirements by Jan. 1.

While this decision is not the outcome CAI hoped for, it does not mark the end of our efforts. CAI pursued this lawsuit to address significant concerns regarding the act’s burdensome reporting requirements and their unintended consequences. As currently written, CAI firmly believes the law should not apply to community associations, and imposes unnecessary and intrusive obligations on community association board members and homeowners that may hinder volunteerism.

Despite this ruling, CAI remains committed to seeking an exemption for all community associations from the act’s filing requirements.

CAI’s next steps

CAI’s legal team is reviewing the decision and exploring all options for moving forward, including a potential appeal.

CAI staff, legal and lobbying teams will continue to use the regulatory process to urge the U.S. Department of Treasury to grant an exemption to community associations.

CAI will continue to urge members of Congress to pass legislation to exempt community associations or pass legislation to delay filing requirements for at least one year.

Please click here to contact your member of Congress to urge them to support CAI efforts.

While our efforts and lawsuit seek an exemption for all community associations, it is still possible the eventual outcome will only apply to community association members of CAI, so we still encourage membership. However, we do not expect notable activities to occur before the November presidential election.

CAI will keep you informed of developments and continue to work diligently to represent your interests. For more information about the lawsuit and CAI’s ongoing efforts regarding the act, visit caionline.org/cta.

Thank you for your continued support as we navigate this challenging process together.

Barbara Holland, CPM, CMCA, is an author, educator and expert witness on real estate issues pertaining to management and brokerage. Questions may be sent to holland744o@gmail.com.