What the Nationwide Injunction Means for Condos & HOAs

A federal court has issued a nationwide injunction temporarily blocking the enforcement of the Corporate Transparency Act (CTA), originally set to take effect on January 1, 2025.

The CTA mandates condominium and HOA board members to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). However, this recent ruling from a Texas court, issued on December 3, 2024, halts the U.S. Department of Treasury from enforcing the BOI reporting requirements for legal entities, including corporations, LLCs, and associations.

The court expressed concerns that the law imposes undue burdens on small organizations and potentially infringes on state sovereignty. For community associations, such as condos and HOAs, this injunction provides a temporary reprieve from compliance efforts until the legal challenges are resolved. Despite the pause, condominium and HOA boards should remain vigilant, as future rulings may reinstate CTA requirements or modify compliance obligations.

The Community Association Institute (CAI) legal team, which previously sought an injunction specifically for condos and HOAs (see CAI Injunction Denied), asserts that the Texas court’s ruling applies nationwide to all U.S.-incorporated community associations. For more details, refer to CAI’s article: CTA Temporarily Blocked Nationwide By Texas Court.

Following the Texas court decision, the FinCEN website has been updated with a new “BOI e-Filing Alert,” stating that BOI reporting requirements are currently voluntary while the US Department of Treasury appeals the Texas courts decision:

“Please note that beneficial ownership information reporting requirements have been affected by a recent federal court order. The Department of the Treasury is appealing that order. In the meantime, reporting companies are not currently required to file a BOIR and are not subject to liability if they fail to do so while the applicable order remains in force.

However, reporting companies may still opt to file a BOIR.”

Click her for Link to the BOI e-Filing Alert.

Additionally, the the home page for BOI reporting now contains a more detailed “Alert” link entitled: “Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only.” Clicking on on that link provides the reader with the following information regarding the voluntary nature of the BOI reporting requirements as well as the status of the appeal:

“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.

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The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

To explore the broader implications of the ruling, see Reuters’ coverage: Texas Judge Blocks Anti-money Laundering Law’s Enforcement Nationwide

COWIE LAW GROUP WASHINGTON DC CONDOMINIUM CONSTRUCTION DEFECT WARRANTY LAW ATTORNEYS AND DISTRICT OF COLUMBIA HOA LAWYERS