On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcing the Corporate Transparency Act (CTA). The injunction temporarily halted community association board members across the U.S. from filing the required beneficial ownership information (BOI) reporting. On December 6, 2024, the government filed a notice of appeal seeking to challenge the injunction.

On December 23, 2024, the Fifth Circuit Court of Appeals issued a stay on the injunction previously granted by the U.S. District Court for the Eastern District of Texas. This stay reinstated the January 1, 2025, filing deadline for beneficial ownership information (BOI) under the Corporate Transparency Act (CTA).

In the evening on December 23, 2024, the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued updated guidance in response to the ruling and extended the filing deadline for Beneficial Ownership Information (BOI) from January 1, 2025, to January 13, 2025. This limited extension did not affect the extended reporting deadline for disaster relief purposes (ex. “A reporting company also must be located in an area that is designated both by FEMA as qualifying for individual or public assistance and by the Internal Revenue Service as eligible for tax filing relief.”).

On December 26, 2024, the Fifth Circuit vacated its own stay, reinstating the preliminary injunction and once again preventing FinCEN from enforcing the CTA’s reporting requirements.

FinCEN issued the following statement: “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.”

On December 31, 2024, the Biden administration requested that the Supreme Court allow enforcement of the CTA while legal challenges against it are resolved. The administration argued that the injunction undermines efforts to combat financial crimes and weakens U.S. leadership in promoting global anti-money laundering standards. The administration noted that three other federal district courts had rejected similar requests to block the law – two because they concluded that the law is likely constitutional and one on the ground that the challengers had not shown that they would be permanently harmed if the law were allowed to go into effect.

The Supreme Court might choose to disregard the request and decline to address the challenges to the CTA. However, if the Court decides to overturn or limit the injunction, the CTA and its associated reporting requirements could be reinstated. Meanwhile, the Financial Crimes Enforcement Network (FinCEN) has issued guidance reaffirming its stance that the CTA is constitutional and emphasizing that FinCEN will continue to accept voluntary reporting.

How Does This Impact Community Association Board Members?

With enforcement and deadlines now uncertain, it is crucial for community association board members to remain vigilant and adaptable as this legal situation continues to evolve.

Community association board members that have not yet filed their initial BOI reports, as well as those with changes to report since their initial filing, should continue gathering the necessary information and be prepared to file promptly if required.

If voluntarily complying with the CTA at this time does not impose an undue burden, we recommend that board members voluntarily file their BOI reports as soon as possible to avoid further delays in the event the injunction is lifted yet again.

Background on the Corporate Transparency Act

In early 2024, the U.S. Federal Trade Commission (FTC) revealed that U.S. citizens lost $10 billion to scams in 2023. Over $750 million of these losses were attributed to “business imposters,” or scams where fraudsters posed as legitimate businesses utilizing fraudulent schemes and false identities. To address this risk, the federal government introduced the Corporate Transparency Act (CTA). Enforced by the Financial Crimes Enforcement Network (FinCEN).

The Corporate Transparency Act (CTA) mandates that certain businesses disclose ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The primary goals of the CTA are to increase business transparency and accountability in an effort to prevent illegal financial activities such as fraud, money laundering, and tax evasion. Beyond these benefits, proponents argue that beneficial ownership information (BOI) reporting can also help financial institutions and legitimate businesses foster trust with both customers and government entities.

Under the CTA, certain community associations will be required to report detailed information about their board members to the Financial Crimes Enforcement Network (FinCEN). Current board members of these associations are considered “beneficial owners” under the CTA.

Consequently, board members must provide FinCEN with detailed personal information, including their legal name, date of birth, residential address, and a copy of a valid, unexpired government-issued identification.

Penalties for non-compliance, whether intentional or not, could result in severe penalties, including daily fines over $500, penalties up to $10,000, and up to two years in prison.

Legal Resource

KSN will continue to monitor the situation, the status of the Corporate Transparency Act (CTA), and its impact on community associations.

If you are a KSN community association client and your board members (“beneficial owners”) have sent our firm their information and documents, we are working diligently to file the required beneficial ownership information (BOI) reporting in compliance with the CTA.

For more information, you can reach KSN by calling 855-537-0500 or visiting our website at www.ksnlaw.com.

Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.

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