A federal judge in Texas, in a lawsuit initiated by a number of small businesses, issued an order on December 3, 2024, granting a preliminary injunction blocking the enforcement of the Corporate Transparency Act (“CTA”).  As you likely already know, the CTA required essentially all business entities in the United States, including community associations, to report beneficial ownership information to an agency of the Treasury Department by January 1, 2025, and to regularly update this information thereafter.  The injunction order states that it applies nationwide and that no business entity needs to comply with the CTA deadline.

     In granting the injunction, the court held that the CTA is unconstitutional as it exceeds the authority of the federal government.  At this point in time the government has not responded to the injunction, but it is likely that the decision will be appealed to the Fifth Circuit Court of Appeals and, potentially, to the Supreme Court of the United States.  The timing or outcome of any appeal is difficult to predict, but it appears likely that the January 1 deadline will be extended.  It must be noted that other courts considering the question, including in an earlier lawsuit filed by the Community Associations Institute, have reached different conclusions, so there is no guarantee that the injunction will be upheld or even that the deadline will be extended by higher courts.  While it is considerably less likely considering the timing, in addition to legal action it is also possible that Congress or the Treasury Department could act to modify the requirements and/or extend the deadline.

     As this issue continues to work its way through the court system, it is important that community association boards stay up to date and be prepared to comply with the CTA reporting requirements if they have not already done so.  Given the requirements and the sheer number of business entities involved, it would be anticipated that a reasonable amount of time to comply if the injunction is lifted would be provided.  That being said…board members should be prepared to comply with the reporting requirements on potentially very short notice.  In addition, while it is not currently required while the injunction is in place, associations who have not already reported their information are still able to report through the FinCEN website if they do not want to risk having to meet a short and sudden deadline.

     If your association has questions or concerns about the status of the Corporate Transparency Act and its reporting obligations, please contact Williams & Strohm, LLC at 614-228-0207 and speak with one of our attorneys.