In a significant legal development today, the U.S. Supreme Court has allowed the enforcement of the Corporate Transparency Act (CTA) to proceed, lifting a previous nationwide injunction that had halted its implementation. This decision marks a pivotal moment in the ongoing efforts to enhance corporate transparency and combat financial crimes.
Background on the Corporate Transparency Act
Enacted in 2021, the CTA mandates that owners and part-owners of an estimated 32.6 million small businesses register personal information, including photo IDs and home addresses, with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Because of the corporate status of Ohio condominiums and HOA’s, this requirement applies equally to the board members that control the association’s activities. The primary objective of this legislation is to prevent the illicit use of anonymous shell companies, thereby strengthening the fight against money laundering, tax fraud, and the financing of terrorism. The Community Associations Institute sought to exclude community associations by way of a lawsuit however that effort was not successful.
Legal Challenges and the Path to the Supreme Court
The CTA faced immediate legal challenges from various business groups and trade organizations. A federal judge in Texas, U.S. District Judge Amos Mazzant, ruled that the law likely exceeded Congress’ constitutional powers and issued a nationwide injunction blocking its enforcement. The federal government, emphasizing the law’s importance in combating financial crimes, appealed this decision, leading to the Supreme Court’s involvement.
The Supreme Court’s Decision
On January 23, 2025, the Supreme Court stayed the nationwide injunction, effectively allowing the CTA’s enforcement to proceed while legal challenges continue in lower courts. This stay will remain in effect until the Fifth Circuit Court of Appeals issues its decision on the preliminary injunction, and potentially until any further appeals are resolved by the Supreme Court.
Ongoing Legal Proceedings
While the Supreme Court’s decision allows for the immediate enforcement of the CTA, the underlying legal challenges to the law’s constitutionality remain unresolved. The Fifth Circuit Court of Appeals is scheduled to hear arguments on the preliminary injunction on March 25. The outcome of these proceedings could have lasting implications for the CTA and its enforcement.
Implications of the Ruling for Ohio HOAs and Condominium Associations
The reinstatement of the CTA’s reporting requirements has significant implications for Ohio community associations. It is anticipated that FinCEN will establish a new reporting deadline very quickly. Community association boards should act now to form a plan for filing if they have not done so already. The Eclipse Community Management team has already completed over 40 filings on behalf of our partner associations. If you would like to learn more about the filing services that we offer, reach out to our team today!
