What the Nationwide Injunction Means for Condos & HOAs
A federal court has issued a nationwide injunction temporarily blocking the enforcement of the Corporate Transparency Act (CTA), originally set to take effect on January 1, 2025.
The CTA mandates condominium and HOA board members to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). However, this recent ruling from a Texas court, issued on December 3, 2024, halts the U.S. Department of Treasury from enforcing the BOI reporting requirements for legal entities, including corporations, LLCs, and associations.
The court expressed concerns that the law imposes undue burdens on small organizations and potentially infringes on state sovereignty. For community associations, such as condos and HOAs, this injunction provides a temporary reprieve from compliance efforts until the legal challenges are resolved. Despite the pause, condominium and HOA boards should remain vigilant, as future rulings may reinstate CTA requirements or modify compliance obligations.
The Community Association Institute (CAI) legal team, which previously sought an injunction specifically for condos and HOAs (see CAI Injunction Denied), asserts that the Texas court’s ruling applies nationwide to all U.S.-incorporated community associations. For more details, refer to CAI’s article: CTA Temporarily Blocked Nationwide By Texas Court.
Following the Texas court decision, the FinCEN website has been updated with a new “BOI e-Filing Alert,” stating that BOI reporting requirements are currently voluntary while the US Department of Treasury appeals the Texas courts decision:
“Please note that beneficial ownership information reporting requirements have been affected by a recent federal court order. The Department of the Treasury is appealing that order. In the meantime, reporting companies are not currently required to file a BOIR and are not subject to liability if they fail to do so while the applicable order remains in force.
However, reporting companies may still opt to file a BOIR.”
Click her for Link to the BOI e-Filing Alert.
Additionally, the the home page for BOI reporting now contains a more detailed “Alert” link entitled: “Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only.” Clicking on that link provides the reader with the following information regarding the voluntary nature of the BOI reporting requirements as well as the status of the appeal:
“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
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The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.
Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.
While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
Update February 19, 2025
On February 17, the United States District Court for the Eastern District of Texas granted the government’s motion for stay a nationwide injunction(Opens in a new window) halting enforcement of the Corporate Transparency Act in Smith v. United States Department of Treasury. The Court cited the Supreme Court of the United States’ decision to stay the preliminary nationwide injunction in the Texas Top Cop Shop, Inc., matter as precedent for their decision.
This was the last remaining nationwide order pausing beneficial ownership reporting requirements. Due to this new court order, reporting requirements under the act are reinstated for applicable community associations.
On February 19, FinCEN issued the following guidance(Opens in a new window) that the Department of the Treasury recognizes that reporting companies may need additional time to comply with their BOI reporting obligations, and FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.
According to FinCEN(Opens in a new window), for the vast majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. FinCEN will provide an update before then of any further modification of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.
CAI continues to track movements in the federal courts over challenges regarding the Corporate Transparency Act and has contacted the United States Department of Treasury, urging an administrative delay be issued due to the chaos and confusion created by these recent court rulings and Congress’ deciding not to take legislative action to extend the filing deadline.
Update January 29, 2025
Last week, the U.S. Supreme Court weighed in on the Corporate Transparency Act, granting a motion that reversed previous lower court injunctions halting enforcement of the federal law. The Financial Crimes Enforcement Network followed up with a statement saying reporting entities are not required to file beneficial ownership information at this time. The high court’s action is the latest in ongoing legal clashes over the act. Read More
Update January 24, 2025
On January 23rd, the Supreme Court stayed the nationwide injunction issued by a federal district court in the Texas Top Cop Shop, Inc. v. McHenry litigation. However, on January 7th, in a separate litigation in Texas (Smith v. U.S. Department of the Treasury), a different federal judge issued an order staying the effective date of the Reporting Rule under the Corporate Transparency Act on a nationwide basis. The Smith order was not affected by the Supreme Court’s action.
FinCEN issued an alert on January 24th confirming that reporting companies are not required to file beneficial ownership information with FinCEN (and are not subject to liability if they fail to do so) while the Smith order remains in force. Reporting companies remain able to submit beneficial ownership information reports on a voluntary basis.
Update January 14, 2025
Currently, compliance with this federal act is strictly voluntary; while we do strongly encourage board members to comply and fill out the required documents on the board member portal, it is not compulsory. We do anticipate in the coming weeks or months that the act will be fully restored and reports will need to be filed relatively quickly. As we receive additional information we will provide it to everyone.
Update- December 27, 2024
The rapidly changing requirements for Corporate Transparency Act (CTA) reporting continue. Just last week, a panel of the U.S. Court of Appeals for the Fifth Circuit issued an Order that reinstated the reporting requirement under the CTA, which earlier this month had been paused by the U.S. District Court for the Eastern District of Texas. On December 26, 2024, however, the full U.S. Court of Appeals for the Fifth Circuit issued a new Order vacating the portion of last week’s Order that had reinstated the reporting requirement. View the Order Here
Update – December 26, 2024
The U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction (described in prior updates below). As a result, the nationwide preliminary injunction issued by the district court enjoining the Corporate Transparency Act (CTA) and enforcement of the CTA and its implementing regulations is once again in effect.
As a result, companies that had been required to file beneficial ownership information report (BOIR) with FinCEN are now not required to do so until the Fifth Circuit decides the appeal. The Court is scheduled to hear arguments in the pending case in March, and while it is logical to assume that the filing deadline would not be before then, that is not guaranteed. Reporting companies would be wise to nevertheless gather beneficial ownership information so that they are prepared to file a BOIR when and if required at a later date.
Companies remain able to submit BOIRs on a voluntary basis while the preliminary injunction remains in effect.
Update – December 23, 2024
Yesterday, the Fifth Circuit Court of Appeals stayed a lower federal court ruling that placed a hold on enforcement of filing requirements under the Corporate Transparency Act. The December 23, 2024, ruling reinstates the January 1, 2025, reporting deadline for beneficial ownership information, including for community associations. Therefore, filing by January 1, 2025, is required.
The U.S. Treasury announced that it recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect. Therefore, they have extended the reporting deadline for reporting companies that were created or registered prior to January 1, 2024, until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN. , check here.
If your association has not completed the requisite CTA filings, Blackstone Management is prepared to offer filing services any community that may need help, Please contact us at [email protected] with any questions.
Update December 3, 2024
On December 3, 2024, a federal district court in the Eastern District of Texas, Sherman Division, issued a Memorandum Opinion and Order granting a national preliminary injunction enjoining the Corporate Transparency Act (“CTA”) and enforcement of the CTA and its implementing regulations (the “Order”). As a result of this Order, the January 1, 2025 deadline to file a beneficial ownership information report (“BOIR”) with FinCEN has been stayed, and reporting companies are not required to file a BOIR while the preliminary injunction remains in effect.
The duration of the preliminary injunction is temporary, and the Department of Justice filed a Notice of Appeal on December 5, 2024. If in the future the Order is no longer in effect, reporting companies could be required to file BOIRs with FinCEN in short order. Accordingly, reporting companies would be well served to continue gathering required beneficial ownership information so that they are prepared to file a BOIR if necessary.
Although not required, reporting companies may file BOIRs on a voluntary basis while the Order remains in effect.
FinCEN has issued an alert confirming the agency’s intention to comply with the Order, which can be viewed on their website here: https://www.fincen.gov/boi.
