In September, the Community Associations Institute (CAI) filed a lawsuit against the U.S. Treasury Department regarding the Corporate Transparency Act (CTA). This lawsuit sought to exempt community associations like HOAs, condos, and cooperatives from its reporting requirements. Enacted in 2021, the CTA mandates that corporations disclose information about their “beneficial owners” to the Treasury’s Financial Crimes Enforcement Network (FinCEN) as part of anti-money laundering and anti-terrorism measures. CAI argued that these requirements impose a heavy administrative and financial burden on community associations. CAI also contends that community associations were not intended targets of the act. The lawsuit highlights potential issues with compliance costs and privacy risks for board members, particularly as failing to file correctly could lead to fines or even imprisonment.
Despite CAI’s arguments, a court recently made a key ruling declining to issue an injunction, meaning the law remains in effect community associations. Existing associations are required to submit their beneficial ownership information by the end of 2024, with hefty non-compliance penalties still in force. Here is the message from Community Association Institute:
“A preliminary injunction was NOT GRANTED in this case, meaning your board will, as this case is being litigated and advocacy efforts continue, must report BOI information to FinCEN by January 1, 2025, or face financial and criminal penalties. While this decision is not the outcome we had hoped for, it does not mark the end of our efforts. CAI’s advocacy efforts are continuing and the legal team is considering next steps; including a potential appeal to the judges ruling on the preliminary injunction. The lawsuit itself will continue to go through the legal process.”
Community association leaders should take action to complete the reporting requirements as soon as possible. Many community association industry partners have been waiting to see if there would be changes in the law prior to the end of the year, but it seems unlikely that will occur at this point. Service providers that assist with the filings anticipate an end of year rush and it may be more difficult and/or costly to complete the filing if you wait until closer to the end of the year.
Looking for a partner to help you navigate the reporting requirements of the Corporate Transparency Act? Eclipse Community Management has an established process and in-house expertise to help you assemble everything necessary to complete the reporting requirement. We can assist with the filing itself making it easy and effortless. Stay tuned to our blog and website for additional information as the situation continues to unfold specific to the community association industry.
