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.
