Federal ruling temporarily blocks Corporate Transparency Act

Note: This week I am turning my column over to Blaine Tobin, senior media relations manager for the Community Associations Institute. He recently released this statement on the Corporate Transparency Act.

The Community Associations Institute applauds the Dec. 3 decision by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop Inc., et al. v. Garland, et al. to issue a preliminary nationwide injunction against the Corporate Transparency Act.

The court decision immediately blocks the U.S. Department of Treasury from enforcing reporting requirements that mandate business owners — including community association board members — to provide sensitive personal information to a federal database under the act.

In his opinion, Judge Amos L. Mazzant III ruled that neither the act nor its implementing regulations may be enforced, saying that “reporting companies need not comply with the CTA’s Jan. 1, 2025, BOI reporting deadline pending further order of the court.” CAI’s legal team believes this preliminary injunction applies to all community associations incorporated within the U.S.

“This is good news today, but it isn’t the end of the story,” says Thomas M. Skiba, CAE, CAI’s chief executive officer. “We firmly believe the act’s requirements place an excessive burden on community associations, which operate differently from traditional corporations and small businesses.

“CAI continues its unwavering commitment to protecting the community association housing model and its members’ interests,” Skiba adds. “We continue to believe that exempting community associations from the act is in the best interests of CAI member communities and the government’s goal of addressing money laundering and terrorism funding. This is a time of uncertainty and industry leaders should remain vigilant to any updates from the court system.”

Plaintiffs in the Texas Top Cop Shop case made similar arguments to those made in CAI’s federal lawsuit against the U.S. Department of Treasury, Secretary Janet Yellen and the director of the Financial Crimes Enforcement Network.

The plaintiffs argued the act constituted an overreach of Congress’ authority, improperly compelled speech and contradicted the rights of associations guaranteed by the First Amendment. It also violated the Fourth Amendment by forcing the disclosure of private information. Mazzant’s opinion cites arguments and rulings from CAI’s pending case in the U.S. District Court for the Eastern District of Virginia to substantiate his ruling.

CAI believes community association board members who already complied with the act’s reporting requirements took a responsible route. “We recognize the situation is complex as we are so close to the reporting deadline,” Skiba says. “We continue to believe that exempting community associations from the act is in the best interests of CAI member communities.”

More details of the Texas Top Cop Shop ruling can be found online. For more information on CAI’s pending lawsuit, advocacy efforts and the act’s impact on community associations, visit caionline.org/CTA.

Blaine Tobin can be reached at 703-970-9235 or btobin@caionline.org.

Barbara Holland, CPM, CMCA, is an author, educator and expert witness on real estate issues pertaining to management and brokerage. Questions may be sent to holland744o@gmail.com.