Corporate Transparency Act Enjoined Nationwide?

The purpose of this post is to provide a key update on the Corporate Transparency Act (CTA) that may impact your compliance plans.

Yesterday, a federal court in Texas issued an order in Texas Top Cop Shop, Inc. v. Garland enjoining enforcement of the CTA's Reporting Rule nationwide. The court ruled that the CTA exceeds Congress’s authority under the Commerce Clause, arguing that it improperly regulates all companies, not just those engaged in interstate commerce.

Key points from the ruling:

• The court found the CTA to be a law enforcement tool rather than a regulation protecting commerce.
• The compliance deadline of January 1, 2025, has been stayed under § 705 of the Administrative Procedure Act (APA).
• Reporting companies are not required to comply with the CTA’s reporting requirements at this time, pending further court orders.

Unfortunately, this case does not amount to a final ruling on the CTA's constitutionality. It’s unclear how FinCEN will interpret or apply this injunction, particularly with other cases pending in different courts.

This is a positive development for community associations seeking clarity, but the situation remains fluid as further court rulings and FinCEN guidance could provide additional interpretation.

Application to HOAs:

The ongoing lawsuit (which we posted about here) filed by the Community Associations Institute (CAI) challenged the broad application of the CTA to community associations, arguing that most HOAs and condos are non-commercial entities with limited financial activity and should not be subject to the burdensome reporting obligations. While the court’s ruling does not specifically address associations, it casts doubt on whether entities like HOAs and condos—often structured as nonprofit corporations—fall within the scope of the CTA. This is a positive development for community associations seeking clarity, but the situation remains fluid as further court rulings and FinCEN guidance could provide additional interpretation. HOAs and condos should stay informed and consult with their real estate attorney or HOA legal counsel to navigate these evolving requirements.

Recommendations:

• If you’ve already filed under the CTA, no further action is needed at this time.
• If you have not filed, this ruling may mean you are not required to comply at this point. However, given the unsettled nature of this issue, staying updated on the latest developments and/or consulting with your business, corporate, or real estate attorney is strongly advised.