On September 10, 2024, the Community Associations Institute (CAI), an international not-for-profit research and education organization headquartered in Virginia, and in a representational capacity on behalf of volunteer community association board members, along with five community associations from various states, filed a complaint against the United States Department of Treasury, Janet Yellen, in her official capacity as the Secretary of the United States Department of Treasury, and Andrea Gacki, in her official capacity as Director of Financial Crimes Enforcement Network (FinCEN), challenging the Corporate Transparency Act’s (CTA) application to community associations.
The complaint, filed in the United States District Court for the Eastern District of Virginia, asks the Court to declare that community associations are exempt from the CTA and that the CTA is unconstitutional as applied to community associations. It also asks the Court to review FinCEN’s FAQs, which assert the CTA’s applicability to community associations, and it asks the Court to review FinCEN’s denial of CAI’s request for exemption for community associations from the CTA and to determine that the denial was arbitrary and capricious and otherwise without merit.
In the most general sense, the lawsuit seeks to secure an exemption to the CTA for community associations. If exempted, board members and other beneficial owners of community associations (as defined by the CTA), will not need to submit their personal identifying information (also referred to as Beneficial Ownership Information or BOI) to FinCEN to be linked to the community association they serve. FinCEN set up an online filing system for this.
As part of the lawsuit, CAI requested an early hearing to ask the Court to issue an order (called a preliminary injunction) stating that community associations need not comply within the CTA’s January 1, 2025 filing deadline. If granted, this order would remain in place pending the outcome of the litigation. The Court scheduled the early hearing for October 11, 2024.
It is important to understand that if the Court issues the order, as of the date of this article, we do not know how far reaching the order will be. It may apply to only those community associations who are members of CAI. It may apply to only those community associations within the jurisdiction of the Court (i.e., those located in Virginia), or it may apply more broadly to all community associations otherwise subject to the CTA. We will provide updated guidance once we obtain a copy of the Court’s order following the October 11 hearing. It is also important to understand that as of the date of this article, community associations must comply with the CTA, and board members and other beneficial owners must file their BOI with FinCEN by January 1, 2025. If not, severe penalties may apply, including civil fines up to $500 per day (annually adjusted for inflation) and criminal penalties of up to two years in prison and a fine up to $10,000. If you need assistance with filing your community association’s BOI (done as part of a Beneficial Ownership Information Report or BOIR) or if you have any questions, please contact this firm.
The information contained in this article is not intended to be legal advice and is provided for educational purposes only.
