Corporate Transparency Act affecting Condo Associations and HOA's Declared Unconstitutional by Alabama District Court Judge Liles C. Burke

Posted by Stephen G. DadayFeb 23, 20240 Comments

On March 1, 2024, Alabama Federal District Court Judge Liles C. Burke granted summary judgment in favor of National Small Business United d/b/a National Small Business Association and against the United States Treasury Department ruling that the Corporate Transparency Act violated the Constitution since "it cannot be justified as an exercise of Congress' enumerated powers. Effectively, the Court ruled that the CTA went beyond the bounds of the Constitution's enumerated powers granted to the legislative branch.

District Court Judge Declares Corporate Transparency Act Unconstitutional

Effective January 1, 2024, Congress has enacted what has been titled the Corporate Transparency Act. The Act was passed primarily to assist Federal investigatory agencies in identifying terrorist organizations or money laundering individuals or entities that use small corporations or limited liability companies to conduct illegal activities.

Under the Act, entities that are required to file with state or federal agencies like the Secretary of State for purposes of registration or incorporation, must provide certain ownership information, including beneficial ownership information, to the Financial Crimes Enforcement Network of the federal government known as FinCen.

In general, the statute requires that reporting companies disclose certain personal identification information and documentation for those individuals with substantial influence over important decisions. For common interest community associations, this would include the members of the board and its property manager, if any.

Although the law went into effect on January 1, 2024, the deadline for companies in existence prior to January 1, 2024 to report is December 31, 2024. For companies formed after January 1, 2024, the deadline is 90 days after filing, registration or incorporation. There are 23 exceptions to the reporting company status, however, in general, most small companies or LLCs will be required to report. One of the exceptions is for entities that are tax exempt under the Internal Revenue Code.

In our practice, most condominium and homeowners associations, specifically those that are incorporated as not for profit corporations, will be required to report under this Act.

It is likely that the ruling will be appealed to the United States Court of Appeals for the 11th Circuit.

Please see the links below for more information.

FinCen resources.

Small Entity Compliance Guide

FinCen FAQ: