Recently Filed Federal Lawsuit Seeks To Exempt Community Associations From the Corporate Transparency Act’s Mandatory Reporting Requirements

By Nicole D. Miller

As we discussed here, starting January 1, 2025, most existing homeowner and condominium associations (Community Associations) in New Jersey, and across the country, will be considered “reporting companies” that must comply with the extensive, detailed, and complex reporting requirements of the federal Corporate Transparency Act (CTA). Unless an association falls within one of the act’s 23 enumerated exemptions (and most don’t), the governing board members (Board) must provide “Beneficial Ownership Information” (BOI) to the Financial Crimes Enforcement Network (FinCEN) division of the U.S. Treasury Department by designated deadlines. Failure to comply with the CTA can result in substantial fines and penalties, including incarceration.

For boards composed primarily of volunteer homeowners, and associations with already stretched resources, sharing and reporting sensitive personal information to the federal government while parsing the language of a confusing and ambiguous statute presents significant burdens and challenges. This is why, on September 11, 2024, the country’s largest community association advocacy organization filed a federal lawsuit challenging the constitutionality of the CTA, seeking to exempt associations and boards from its reporting requirements, and seeking a preliminary injunction against its enforcement as to Community Associations and Boards. The motion hearing for the preliminary injunction is currently scheduled for October 11, 2024.

The lawsuit filed by the Community Associations Institute (CAI) against the United States Department of the Treasury in the U.S. District Court for the Eastern District of Virginia asserts that the CTA imposes excessive administrative and financial burdens on the more than 75.5 million Americans living in 365,000 community associations across the U.S.

In a press release, the CAI’s chief executive officer, Thomas M. Skiba, said, “Requiring community associations to comply with the Corporate Transparency Act not only diverts resources away from community governance and service but also poses a chilling effect on volunteerism. We are asking the court to recognize the constitutional violations, overreach of federal powers, and equal protection violations related to the Corporate Transparency Act and community associations.” However, CAI has stated that if the lawsuit is successful in exempting Community Associations from the CTA, “it is very possible the exemption will only apply to community associations that are members of CAI” given the decision in National Small Business United v. Yellen, which was discussed here.

Until and unless the court issues an injunction against enforcement of the CTA regarding community associations, boards must take steps to comply with the law’s reporting requirements by the following deadlines:

• Associations formed during calendar year 2024 must submit their BOI report within 90 days after the date of the entity’s formation (i.e., the filing date of its Articles or Certificate). 
• Associations formed before January 1, 2024, must submit their BOI report on or before January 1, 2025 (one year after the effective date of the CTA).    
• Associations formed on or after January 1, 2025, must submit their BOI report within 30 days after its date of formation (i.e., the filing date of its Articles or Certificate).

If you have any questions about the CTA and its impact on Community Associations, please contact Nicole Miller at Ansell Grimm & Aaron.

Freedom From Clutter v. Freedom of Expression: What NJ Community Association Boards Can and Can’t Do About Political Signs This Election Season

By Nicole D. Miller

Labor Day 2024 has come and gone, which means that after a summer of dramatic developments, the final sprint to Election Day is here. It also means citizens in New Jersey and across the country will be more engaged in the political process and want to ensure their voices are heard. In addition to the ballots they cast, voters often like to declare their political preferences, and support their preferred candidates, by posting signs in their yards, windows, balconies, or other highly visible areas. Doing so is the essence of free speech as protected by the First Amendment to the U.S. Constitution and New Jersey’s Constitution. As the U.S. Supreme Court has said, political signs on one’s property are “a venerable means of communication that is both unique and important.”

But for New Jersey community associations, election season presents unique and tricky challenges that pit the covenants and rules that all owners agreed to abide by with their right to political expression. When owners display signs and other items that, on their face, appear to violate the rules and limitations outlined in the covenants, conditions, and restrictions (CC&Rs) that govern their community, it can add fuel to an already combustible political environment, leading to conflicts and lawsuits between boards and owners.

New Jersey’s Free Speech Protections Are Broader Than the First Amendment’s

No specific statutes govern or delineate the power of New Jersey community associations to ban or limit the size, number, and placement of political signs. Additionally, the First Amendment only limits the ability of government actors to restrict free speech. Since community associations are not government entities, the First Amendment doesn’t govern the actions or policies of community associations as to political signs. 

However, New Jersey’s constitution is unique in that its free speech protections go further than the First Amendment and do not just apply to the government. As New Jersey’s Supreme Court noted in its decision in Mazdabrook Commons Homeowners’ Ass’n v. Khan addressing the conflict between CCRs and the constitutional right to free expression, ” an individual’s affirmative right to speak freely is protected not only from abridgment by government, but also from unreasonably restrictive and oppressive conduct by private entities in certain situations.” 

In that same case, the Court declared that a community association’s total ban on signs of any kind, other than “For Sale” signs but including political signs, “violates the free speech clause of the State Constitution.”

Reasonable Time, Place, and Manner Restrictions on Political Signs Are Permitted

Short of a total ban, courts in New Jersey have generally upheld the authority of community associations to enforce reasonable restrictions on political signs, provided these restrictions are: (i) clearly outlined in the governing documents; (ii) content-neutral; and (iii) applied uniformly. For instance, New Jersey courts have recognized that community associations have a legitimate interest in maintaining the aesthetic appearance of the community, which can justify certain restrictions on the display of political signs. However, these restrictions must be reasonable and not so broad as to effectively prohibit all forms of political expression.

One solution some New Jersey community associations have embraced is implementing rules that allow for the display of political signs but impose certain limitations. For example, an association might allow residents to display one political sign per candidate or issue, with restrictions on the size and placement of signs. This approach seeks to balance the homeowner’s desire for political expression with the association’s interest in maintaining an attractive, cohesive community environment.

If your community association board is facing an issue involving an owner’s display of political signs or has questions about its power to restrict such signage, please contact Nicole Miller at Ansell.Law.