As of December 27, 2024, the enforcement of the Corporate Transparency Act (CTA) has been paused due to a nationwide injunction reinstated by the U.S. Court of Appeals for the Fifth Circuit. This means that homeowner and condominium associations are not currently required to file Beneficial Ownership Information (BOI) reports, which were previously due by January 13, 2025.
The injunction will remain in place while the court considers the constitutional challenges to the CTA in an expedited appeal. The Fifth Circuit issued an expedited briefing schedule with arguments being heard before the court in March 2025. Until a decision is rendered, associations may choose to submit BOI reports voluntarily but there is no legal obligation to do so. Still, the decision will be subject to further appeal and many experts presume it will not be settled until the case is decided by the United States Supreme Court.
FinCEN Response
The FinCEN BOI Newsroom issued a formal statement in response to the reinstated injunction:
“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports. More information is available on our website (https://www.fincen.gov/boi).”
Community Associations Institute Response
The Community Associations Institute issued the following statement in response to the developments:
On Dec. 26, the full panel of judges of the Fifth Circuit Court of Appeals issued an order vacating the stay of a preliminary injunction halting reporting compliance under the Corporate Transparency Act. The U.S. Department of Treasury’s FinCEN released a statement this afternoon announcing BOI filings are voluntary.
The most recent decision suspends the upcoming Jan. 2025 deadline requiring community association boards to file sensitive personal information with the government in an effort to combat terrorist activities.
The latest dramatic decision in Texas Top Cop Shop v. Garland follows a Dec. 23 order reversing a temporary preliminary injunction imposed by the U.S. District Court for the Eastern District of Texas.
This means beneficial ownership information reporting requirements have been paused again by a federal court for applicable community associations under federal statute. This continues to be a developing issue. Association boards should remain vigilant and informed on these ongoing updates.
Please visit CAI’s Corporate Transparency Act resource page for additional information.
Options for Community Associations
Association boards should strongly consider voluntary completion of the Beneficial Ownership Information report to ensure they remain compliant within this ever-changing legal landscape. Filing the report is certainly the safest option as this makes its way through the judicial system. Community associations that have partnered with Eclipse Community Management have three options for reporting:
Option 1 – Delegate Reporting to the Association’s Attorney
- Validation documents must be provided to the attorney by each board member.
- Cost for the initial report is determined by your attorney, typically ranging from $250 to $800+.
- Cost for any necessary updated reports is determined by your attorney.
- PLEASE NOTE: The majority of legal professionals are recommending that a voluntary report be filed on behalf of the association. If the association’s board has tasked the attorney to do so, they will act on that instruction unless directed otherwise.
Option 2 – Delegate Reporting to Eclipse Community Management
- Validation documents must be provided to Eclipse by each board member via the secure data collection tool on our website.
- Cost for the initial report is $400.
- The cost for any necessary updated reports is $250 per occurrence.
- PLEASE NOTE: The majority of legal professionals are recommending that a voluntary report be filed on behalf of the association. if the association’s board has tasked Eclipse to do so, we will act on that instruction unless directed otherwise.
Option 3 – Assume Board Responsibility for Filing the Beneficial Ownership Information Report
- Board members provide their documents to the designated individual or fellow board member.
- The Board retains responsibility for completion of the report no later than January 13, 2025.
- There is no cost for this approach.
Option 4 – Wait and See
Association boards can choose to wait out the legal challenges and see what decision is ultimately rendered. The primary risk of this approach is the potential for the law to be upheld, requiring association boards to pivot quickly to reach compliance. There is also concern that the demand for new filings will exceed the capacity of the professionals capable of assisting the association.
Background of the Corporate Transparency Act
The CTA requires entities – including homeowner and condominium associations – to disclose information about their “beneficial owners”. Beneficial owners are individuals who either exercise substantial control over the entity or own at least 25% of its ownership interests. Under the FinCEN rules, Association board members are considered the beneficial owners of a homeowner or condominium association. The CTA is designed to prevent the misuse of companies for activities such as money laundering, tax fraud, and other financial crimes, aligning U.S. regulations with international transparency standards.
Legal Challenges to Date
On September 10, 2024, Community Associations Institute (CAI) filed a lawsuit challenging the application of the Corporate Transparency Act on community associations. The lawsuit requested a preliminary injunction to delay the reporting requirements. On October 24, 2024, CAI’s preliminary injunction request was denied by the federal judge in this case.
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in a different case, prohibiting enforcement of the Corporate Transparency Act (CTA) nationwide. The injunction temporarily halted any implications or penalties for community associations that had not completed the required reporting.
On December 6, 2024, the federal government filed a notice of appeal seeking to challenge the injunction.
On December 18, 2024, the CAI filed an amicus brief in support of the case and the importance of maintaining the current nationwide preliminary injunction.
On December 23, 2024, the Fifth U.S. Circuit Court of Appeals issued a stay on the injunction previously granted by the U.S. District Court for the Eastern District of Texas, effectively allowing the federal government to move forward with the implementation of the CTA. In response to the ruling, FinCEN announced a delay in the original reporting deadline of January 1, 2025; allowing until January 13, 2025 for completion of the reporting for all but very recently formed associations.
On December 27, 2024, the nationwide injunction was reinstated by the U.S. Court of Appeals for the Fifth Circuit, effectively prohibiting the government from requiring submission of Beneficial Ownership Information during the pendency of the case.
Next Steps
For further information, you can refer to these sources:
- Community Associations Institute’s Corporate Transparency Act page
- FinCEN FAQ page
- Ohio Secretary of State
- U.S. Chamber of Commerce
The leadership team at Eclipse Community Management continues to follow this topic closely and we are happy to answer questions you may have. If we can be of assistance, please contact us via our website.
