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On Jan. 23, the U.S. Supreme Court granted the government’s motion to stay a nationwide injunction halting enforcement of the Corporate Transparency Act in Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland.
A separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place.
As a result of these disparate decisions, reporting companies are not currently required to file beneficial ownership information with the Financial Crimes Enforcement Network despite the high court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
On Jan. 24, FinCEN issued the following guidance, “in light of the 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.”
According to FinCEN, and as of 12 PM EST on January 24th, this means that reporting requirements under the Corporate Transparency Act continue to be paused for corporations and nonprofits including applicable community associations.
Status of CAI’s CTA Lawsuit
While these lawsuits continue to go through the judicial process, CAI’s lawsuit also is still in play. On Sept. 10, 2024, CAI filed a lawsuit against the U.S. Department of Treasury, Secretary Janet Yellen, and the director of FINCEN challenging the application of the Corporate Transparency Act on community associations. This action is being taken to protect CAI members from the burdensome and unnecessary requirements of the act.
On Oct. 24, 2024, CAI’s preliminary injunction request was denied by the federal judge. CAI appealed the court’s denial on Nov. 4, 2024, and on Nov. 12, 2024, filed its opening brief of the appeal in the Fourth Circuit urging a pause on reporting requirements for community associations while this lawsuit is adjudicated. The government’s response to CAI’s appeal is due on Jan. 31.
Status of CTA Lobbying and Advocacy Efforts
With the 199th Congress officially sworn-in, CAI continues its ongoing lobbying and advocacy efforts on Capitol Hill to either repeal or exempt applicable community associations from the CTA’s reporting requirements. H.R. 425 To repeal the Corporate Transparency Act and S. 100 A bill to repeal the Corporate Transparency Act were introduced in January. If passed, both bills will completely repeal the CTA and its beneficial owner reporting requirements.
Please take time today to reach out to your members of Congress to ask them to support H.R. 425 and S. 100, via this link, and share this important request with your neighbors.
This continues to be a developing issue. Association boards should remain vigilant and informed on these ongoing updates.
If you have any questions, please contact CAI’s Government & Public Affairs team at government@caionline.org.
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