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Updates on The Corporate Transparency Act as of 3/5/2025

Lindsay J. Anderson, Esq.

Attorney

858.527.0111
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Practices: Community Association Counsel 

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*This article is an update to the previous versions:

 

ENFORCEMENT OF THE CORPORATE TRANSPARENCY ACT SUSPENDED

In a significant development for U.S. common interest developments, the U.S. Treasury Department (Treasury Department) issued a press release on March 2, 2025, clarifying its enforcement stance on the Corporate Transparency Act (Act).

The press release stated the Treasury Department will not enforce penalties or fines associated with the beneficial ownership information (BOI) reporting rule under the existing regulatory guidelines.  The press release also said the Treasury Department will refrain from enforcing any penalties or fines against U.S. citizens, domestic reporting companies, or their beneficial owners after the upcoming rule changes take effect.

To clarify this last point, the Treasury Department  explained  it will be “issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.  Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”

While the official rule is still forthcoming, this press release shows that the Treasury Department is moving toward tailoring the Act so that it does not apply to U.S. citizens or domestic reporting companies.  Once the official rule is implemented, it is anticipated the Act will no longer apply to domestic reporting companies, including common interest developments.

Secretary of the Treasury Scott Bessent stated, “This is a victory for common sense.”

This continues to be a developing issue and common interest development boards should anticipate updates as the official rule has not yet been implemented.

EFFORTS BY COMMUNITY ASSOCIATIONS INSTITUTE

The Community Associations Institute (CAI) has spent much of the past two years advocating for common interest developments.  CAI filed a lawsuit challenging the application of the Act on common interest developments and utilized lobbying and advocacy efforts in Washington D.C. to encourage Congress to repeal the Act, exempt common interest developments, or delay the first reporting date.  Epsten, APC thanks CAI for its diligent efforts to protect common interest developments.

Updates on The Corporate Transparency Act as of 2/19/2025

Lindsay J. Anderson, Esq.

Attorney

858.527.0111
Email
Practices: Community Association Counsel 

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CORPORATE TRANSPARENCY ACT REPORTING REQUIREMENTS REINSTATED

On February 17, 2025, the United States District Court for the Eastern District of Texas stayed a nationwide injunction halting enforcement of the Corporate Transparency Act (Act) in Smith v. United States Department of Treasury. The Eastern District of Texas’ decision cited the recent Supreme Court of the United States’ Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland decision as precedent.

The Smith nationwide injunction was the last remaining order pausing beneficial ownership reporting requirements. The Eastern District of Texas’ decision in Smith means common interest developments which meet FinCEN’s “reporting company” definition must file a beneficial ownership information (BOI) report within the filing deadlines. Click here for more information to help you determine if your common interest development is a “reporting company.”

UPDATED DEADLINE TO FILE – 12:00 PM EASTERN, MARCH 21, 2025

On February 19, 2025, FinCEN issued an alert regarding the Act.  FinCEN stated that the decision by the Eastern District of Texas reinstated reporting requirements under the Act.  However,  the Department of the Treasury recognized  some reporting companies may need additional time to comply with reporting obligations, so FinCEN generally extended the deadline 30 calendar days to 12:00 pm Eastern, March 21, 2025.

If your association was previously given a later deadline by the Department of the Treasury, the later deadline should still be met. These extensions were granted for various reasons, including certain disaster relief extensions. However, for most reporting companies, the deadline to file beneficial owner information reports is March 21, 2025.

IS THERE STILL HOPE THE REQUIREMENTS WILL CHANGE BEFORE THE DEADLINE?

Status of CAI’s CTA Lawsuit, Lobbying, and Advocacy Efforts

As you may recall, the Community Associations Institute (CAI) filed a lawsuit challenging the application of the Act on common interest developments.  CAI requested a preliminary injunction, but that request was denied by a federal judge.  CAI appealed the denial and the government responded to the appeal on February 7, 2025. CAI’s response is due at the end of February.

In addition, CAI is continuing to utilize lobbying and advocacy efforts in Washington D.C. to encourage Congress to repeal the Act, exempt common interest developments from the Act’s reporting requirements, or delay the first reporting date.  H.R. 736 and S. 505 are two bills that were recently introduced to seek a one-year delay of the CTA reporting requirements.

If you are interested in assisting with CAI’s efforts, visit CAI’s Action Center for information about how to contact your  Congress person and Senators to ask them to support H.R. 736 and S. 505.

This continues to be a developing issue. Common interest development boards should continue to remain informed and should be prepared to file any required reports prior to FinCEN’s March 21, 2025 deadline.

 

 

*This article is an update to the previous versions:

 

Updates on The Corporate Transparency Act as of 1/30/2025

Lindsay J. Anderson, Esq.

Attorney

858.527.0111
Email
Practices: Community Association Counsel 

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*This article is an update to the previous versions:

 

 
CORPORATE TRANSPARENCY ACT REPORTING REQUIREMENTS REMAIN PAUSED

On January 23, 2025, the U.S. Supreme Court stayed a nationwide injunction halting enforcement of the Corporate Transparency Act (Act) in Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland. This decision appears at first glance to require that common interest developments comply with the Act.  However, Texas Top Cop Shop is not the only case currently making its way through the judicial system.  A  different federal judge in Texas imposed a similar nationwide injunction in Smith v. U.S. Department of the Treasury.  The Smith nationwide injunction still remains in place.

On January 24, 2025, FinCEN issued an alert confirming that despite the U.S. Supreme Court’s action in Texas Top Cop Shop, while the Smith order remains in place, reporting companies are not currently required to file beneficial ownership information (BOI) reports with FinCEN and are not subject to liability for failure to do so. That said, FinCEN reiterated that reporting companies may continue to voluntarily submit beneficial ownership information reports.

At present, the Smith nationwide injunction means the reporting requirements for applicable common interest developments are currently “on hold” and thus applicable common interest developments are not currently subject to liability for failure to meet filing deadlines.

Common interest development boards should continue to remain informed and prepared to act quickly to meet filing deadlines as needed.  Our office will continue to provide updates as they arise.

Status of CAI’s CTA Lawsuit, Lobbying and Advocacy Efforts

As you may be aware, the Community Associations Institute (CAI) filed a lawsuit challenging the application of the Act on common interest developments.  CAI requested a preliminary injunction but that request was denied by a federal judge.  CAI appealed and the government’s response to CAI’s appeal is due on January 31, 2025.

In addition, CAI is utilizing lobbying and advocacy efforts in Washington D.C. to encourage legislators to either repeal the Act or exempt common interest developments from the Act’s reporting requirements. H.R. 425 and S. 100 are two bills that were introduced to repeal the Act.

If you are interested in assisting with CAI’s efforts, visit CAI’s Action Center for information about how to contact your Members of Congress and Senators to ask them to support H.R. 425 and S. 100.

For additional information and updates regarding the Act and CAI’s efforts to repeal the Act or exempt applicable common interest developments visit www.caionline.org/CTA.

Updates on The Corporate Transparency Act as of 12/27/2024

 

 

By Lindsay J. Anderson, Esq.

 

*This article is an update to the previous versions:

FIFTH CIRCUIT COURT OF APPEALS REINSTATES NATIONWIDE PRELIMINARY INJUNCTION OF THE CORPORATE TRANSPARENCY ACT

On December 26, 2024, the full panel of the Fifth Circuit Court of Appeals (“Fifth Circuit”) vacated the December 23, 2024 decision by a three judge panel to stay the preliminary nationwide injunction against the Corporate Transparency Act (“Act”) created by the December 3, 2024 ruling in Texas Top Cop Shop, Inc., et al. v. Garland, et al.  The Fifth Circuit Court of Appeals court order can be read here. Please note this order simply reinstates the initial preliminary injunction and is still not a final ruling on the Act’s constitutionality.

At present, the Fifth Circuit’s order means the reporting requirements for applicable community associations are currently “on hold” and applicable community associations are not currently required to meet the January deadlines for filing.

The Fifth Circuit is expediting the government’s appeal and additional developments are imminent.  Our office will continue to provide updates as they arise.  However, community association boards should continue to closely monitor the developments and remain prepared to meet applicable filing deadlines if the filing requirements are reinstated.

For additional information and updates on the Texas Top Cop Shop case appeal and its applicability to the Act visit www.caionline.org/CTA.

Updates on The Corporate Transparency Act as of 12/24/2024

 

 

By Kieran J. Purcell, Esq.

 

*This article is an update to the previous versions:

BOI REPORTING DEADLINE EXTENDED BY FINCEN

On December 23, 2024, the Fifth Circuit Court of Appeals granted a stay over the preliminary nationwide injunction against the Corporate Transparency Act (Act) created by the December 3, 2024 decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al. The Fifth Circuit Court of Appeals also issued an order reinstating the January 1, 2025 beneficial ownership information (“BOI”) reporting deadline.

On December 24, 2024, the Financial Crimes Enforcement Network (FINCEN) extended reporting deadlines. Notably, FINCEN extended the reporting deadline for reporting companies created or registered to do business before January 1, 2024. These companies have until January 13, 2025, to file their initial BOI reports.

FINCEN also extended other BOI reporting deadlines. Information about these additional extensions can be found at https://www.fincen.gov/boi.

The Fifth Circuit Court of Appeals court order can be read here. Please note this order just stays the initial preliminary injunction and is still not a final ruling on the Act’s constitutionality. To that end, the Fifth Circuit’s order directed the appeal in this lawsuit be expedited to the next available oral argument panel.

CAI continues to track federal courts for challenges of the Act and is in contact with the United States Department of Treasury about the Act. For additional information and updates on the applicability to the Act visit www.caionline.org/CTA.

Updates on The Corporate Transparency Act as of 12/23/2024

 

 

By Kieran J. Purcell, Esq.

 

*This article is an update to the previous versions:

FIFTH CIRCUIT COURT OF APPEALS STAYS PRELIMINARY INJUNCTION OF THE CORPORATE TRANSPARENCY ACT

On December 23, 2024, the Fifth Circuit Court of Appeals granted a stay over the preliminary nationwide injunction against the Corporate Transparency Act (Act) created by the December 3, 2024 decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al. The Fifth Circuit Court of Appeals also issued an order reinstating the January 1, 2025 beneficial ownership information (“BOI”) reporting deadline.

The Fifth Circuit Court of Appeals court order can be read here. Please note this order just stays the initial preliminary injunction and is still not a final ruling on the Act’s constitutionality. To that end, the Fifth Circuit’s order directed the appeal in this lawsuit be expedited to the next available oral argument panel.

At present, the Fifth Circuit’s order means all reporting companies created or registered to do business before January 1, 2024, have until January 1, 2025, to file their initial BOI reports.

CAI continues to track federal courts challenges of the Act and is in contact with the United States Department of Treasury urging an administrative delay be issued due to the chaos and confusion created by these recent court rulings, Congress’s decision not to take legislative action to extend the filing deadline, and the end of year holidays.

For additional information and updates on the Texas Top Cop Shop case appeal and its applicability to the Act visit www.caionline.org/CTA.

Updates on The Corporate Transparency Act as of 12/18/2024

 

 

 

By Kieran J. Purcell, Esq.

 

*This article is an update to the previous versions:

U.S. DISTRICT COURT DENIES GOVERNMENT’S MOTION TO STAY PRELIMINARY INJUNCTION OF THE CORPORATE TRANSPARENCY ACT

On December 17, 2024, the U.S. District Court for the Eastern District of Texas denied the Government’s Motion to Stay Preliminary Injunction Pending Appeal of the December 3, 2024 decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al. which imposed a preliminary nationwide injunction against the Corporate Transparency Act (Act).

In making its decision, the Court noted when Congress enacted the Act almost five years ago, the Act had no implementation date, so there is no compelling need to lift the stay, especially where the Court has found the statute to likely be unconstitutional.

The Court also cited FinCEN’s recent website alert announcing a stay on the January 1, 2025, beneficial ownership information (“BOI”) reporting deadline pending determination of the appeal. Due to the widespread media coverage of FINCEN’s alert, the Court concluded lifting the stay would add to, not alleviate, public confusion about the Act.

In conclusion, the Court’s decision means the December 3, 2024 injunction remains in effect until the Fifth Circuit Court of Appeal rules otherwise. However, it is important to remember the order is still a preliminary injunction only. While it temporarily pauses enforcement of the Act on a nationwide basis, enforcement could resume if the injunction is later reversed.

For additional information and updates on the Texas Top Cop Shop case appeal and its applicability to the Act visit www.caionline.org/CTA.

 

Updates on The Corporate Transparency Act as of 8/26/2024

 

 

 

By Kieran J. Purcell, Esq.

 

 

*This article is an update to the version The Corporate Transparency Act (Updated on 2/1/2024)

 

The CTA & Community Associations

As a reminder, in an effort to enhance corporate transparency and combat money laundering, tax fraud, and other illicit activity, Congress passed The Corporate Transparency Act (CTA) back in 2021.  The CTA will be enforced by the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury. FinCEN published the Small Entity Compliance Guide (Guide)[1] to help small entities comply with the requirements of the Beneficial Ownership Information Reporting Rule (Reporting Rule) issued on September 30, 2022.[2]  Although the CTA applies to many types of small business entities, this article addresses movement towards potential exemptions and some of the most frequently asked questions about how the CTA currently applies to common interest developments (CIDs).

 

Movement Towards Potential Exemptions

CAI’s Lawsuit: 

As you may be aware, on March 1, 2024, a federal court ruled the Corporate Transparency Act (CTA) unconstitutional, and the federal government appealed the decision​​​ on March 11, 2024. In June 2024​, the Community Associations Institute (CAI) Board of Trustees approved filing a lawsuit to exempt common interest developments from the Corporate Transparency Act. Click here for more information about CAI’s lawsuit.[3]

CAI is pursuing this case in the U.S. District Court for the Eastern District of Virginia because CAI is incorporated in the District of Columbia and headquartered in Virginia. Additionally, the Eastern district is known for having a rapid docket process that allows it to hear cases more quickly than other federal courts and offers the potential for a faster resolution.  However, CAI National cautions common interest developments should be prepared to comply with the CTA and file the required beneficial ownership information by December 31, 2024 if the lawsuit is not resolved or the law has not been amended. While CAI is actively pursuing legal action to seek an exemption, it urges common interest developments to prepare to comply to avoid potential penalties and ensure they meet all legal requirements. More information can be found on CAI’s CTA FAQ page [4].

 

H.R. 9045:

The Corporate Transparency Act exempts non-profits that hold an IRS non-profit tax determination.  Common interest developments are generally incorporated as a local state non-profit corporation [5]; however, they usually do not have an IRS non-profit tax determination (i.e., 501c).

On July 15, 2024, H.R. 9045 was introduced seeking to exempt common interest developments from the requirements of the Corporate Transparency Act. CAI requests concerned individuals contact their Member of Congress urging them to support H.R. 9045 [6], even if they have done so already about the Corporate Transparency Act.

H.R. 9045 is in the first stage of the legislative process. It will typically be considered by committee, then if approved in committee, sent on to the House as a whole to approve.

 

Application to Common Interest Developments

While CAI’s lawsuit and H.R. 9045 provide hope that there might be an exemption from CTA requirements for common interest developments in the future, it is difficult to anticipate how near that future is.  Common interest developments boards should take the time now to become educated on the requirements and to prepare for compliance in case an exemption is not obtained before the filing deadline at the end of this year.  Unless and until an exemption is made for CIDs, CIDs will need to comply with the annual filing requirements.  For answers to frequently asked questions about the CTA filing requirements, read our article on The Corporate Transparency Act (Updated on 2/1/2024) [7].

[1] FinCEN’s Small Entity Compliance Guide, December 2023, Version 1.1 can be found at: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

[2] Beneficial Ownership Information Reporting Rule, Title 31, Section 1010.380 of the Code of Federal Regulations.

[3] https://www.caionline.org/Advocacy/Priorities/CTA/Pages/landing.aspx

[4] https://www.caionline.org/Advocacy/Priorities/CTA/Documents/FAQ%20FINAL.pdf

[5] https://www.caionline.org/Advocacy/Priorities/CTA/Pages/default.aspx

[6] https://www.votervoice.net/CAI/Campaigns/116499/Respond

[7] https://www.epsten.com/the-corporate-transparency-act/