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To Register, Or Not To Register, That Is The Question.

On Behalf of | Apr 16, 2024 | Condominium & Community Association Law

In 2021, the Federal Government passed the Corporate Transparency Act (CTA) which requires corporations in the United States to register with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).  The overarching goal was to curb illicit financing.  Since its inception, community associations have wondered whether it applies to them and whether they need to register.  My initial answer was yes, you will need to report under the CTA.  The reporting period under the CTA began January 1, 2024, and runs through January 1, 2025.  There is no specific exemption in the CTA for community associations.

My answer has changed recently thanks to a case in the U.S. District Court for the Northern District of Alabama.  In National Small Business Association v. Janet Yellen, the Court weighed the constitutionality of the CTA and emphasized the constitutional principle that federal powers are limited to those expressly granted by the Constitution or necessary and proper for executing those powers. The CTA, according to the court, overstepped these bounds by imposing broad reporting requirements on a vast number of domestic entities based on the potential for foreign misuse of those entities, without a direct and substantial connection to interstate commerce, foreign affairs, or national security.

Now, my advice is to wait until late in the filing period before filing as we are likely to see either legislative change on this front or potentially a Supreme Court ruling which could impact the filing requirement.  So, stay tuned!