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Decision handed down regarding Corporate Transparency Act for Community Associations
By October 30, 2024 Posted in Community Association Law Share
A major decision was handed down by The United States District Court for the Eastern District of Virginia on October 24, 2024, regarding the Corporate Transparency Act (CTA). We previously posted on the CTA and the impact the law could have on community associations. In the case, Community Associations Institute, et al. v. Janet Yellen, Secretary of the United States Department of the Treasury et al, the Court has decided to deny the Plaintiffs motion for a preliminary injunction that could have prevented the CTA from being enforced temporarily.
The Plaintiffs in the case, Community Associations Institute (CAI), which consists of various community associations located throughout the United States, argued the CTA violates the rights to privacy and free association, and would be disruptive to the operations of community associations as board members would choose to resign rather than provide the personal information required under the CTA. The CAI also argued that the Eastern District of Virginia court should follow the lead of the Northern District of Alabama federal court that found the CTA was outside the scope of the federal government’s role in regulating interstate commerce and that the CTA was not meant to apply to non-profit organizations.
The court disagreed with CAI finding the harm claimed from rights violations or disruptions to operations from the requirement to disclose information was speculative. The court further disagreed with the Alabama decision determining the CTA was within the scope of the federal government’s ability to regulate commerce.
With this decision, the CTA remains effective with companies that existed before the effective date of the act facing a January 1, 2025 deadline to comply with the law. It is noteworthy that, in denying the injunction request, the court stated the information required by the CTA is similar to that required on most tax returns making arguments regarding the burden posed by the CTA, unpersuasive.
More information will be provided as this or other matters challenging the CTA proceed through the court system.
The information in this Client Alert is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.