Sept 2024

The State of the Corporate Transparency Act By Gregory Vinogradsky, Esq., EBP, Callahan & Fusco, LLC

B y now, most members of the Community Associations Institute (CAI) have heard of the Corporate Transparency Act (“CTA”) and are likely preparing for compliance. The CTA is a 2021 federal law that went into effect this year that requires most corporations, including community associations, to report and disclose specific information 1 of board members and others that exercise “substantial control” over the corporation. Failure to comply subjects the corporation to stiff penalties (up to $500/day) and up to two years of imprisonment for senior officials. To no one’s surprise, many corporations pushed back against this federal law and argued that compliance was confusing and an overreach by congress. CAI has made similar arguments since community associations are low risk for the types of crimes the law is intended to deter (terrorist

financing & money laundering), and many community associa tions already have issues in attracting volunteers to serve on their boards. As such, CAI is seeking a carve-out for community associations, or a delay in its enforcement

to properly educate its members on compliance. In 2022, the law was challenged in federal court by the National Small Business Association and on March 1, 2024, one federal court held that the CTA exceeded Congress’s consti tutional powers. Ultimately, the decision was appealed by the federal government and is pending in the 11th Circuit Court of Appeals. CAI has recently decided to file its own lawsuit that will seek similar relief. In addition to legal challenges, certain members and committees of con gress have sought its repeal and/or delay in response to complaints from their constituents. While the CTA continues to be challenged in court and congress, the deadline for compli ance (December 31, 2024) is rapidly approach

ing. Board members, management companies and professionals must begin developing and imple menting policies on reporting, with the understanding that “reporting companies” must also provide certain disclosures and may also be responsible for their client’s non-compliance. Candidates that may be running for board positions must also understand that they must comply with the CTA if they are elected, or else face the possibility of removal. As always, the LAC will continue monitoring the CTA and advise if there are any new developments. n

NOTE: 1 Legal name, (2) date of birth, (3) current address and (4) personal identifying number from an acceptable government issued document to be uploaded on https://fincen.gov/boi.

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SEPTEMBER 2024