No Blanket Exemption for Homeowner and Community Associations
On October 24, 2024, the Federal District Court for the Eastern District of Virginia handed down a ruling that effective ends the debate over whether Homeowner and Community Associations will need to file BOI reports under the Corporate Transparency Act (CTA) in 2024.
The bottom line for Associations is that they will need to file BOI reports under the CTA before the deadline on January 1, 2025. Future legislation (or even a regulatory exemption from the Treasury Department) might change how Associations report, but there will be no change before the end of the year. Read on for more details…
Community Associations Institute (“CAI”) and others had filed a lawsuit against the government, making two primary arguments. First, CAI had argued that Associations should be exempt from the CTA because they are non-profit entities. The court ruled that the CTA did not exempt Associations because their tax-exempt status arises under Section 528 of the Internal Revenue Code. The CTA’s exemption for non-profits was limited to those covered by Section 501(c) of the Internal Revenue Code.
CAI’s second argument was that the entire CTA should be held unconstitutional because Congress lacked the constitutional power that would compel corporations and LLCs to file reports about their beneficial argument. This argument, which was the argument advanced by the court in the Northern District of Alabama in the NSBU v. Yellen case, claims that Congress’ power under the Commerce Clause of the Constitution is limited to activities involving interstate commerce. The court in the CAI lawsuit rejected this argument, parting ways with the Alabama court. The court in the CAI lawsuit rejecting this line of analysis. It held that Congress had the power to regulate activities, like the formation of corporations and LLCs, if the “aggregate effect of all [the] regulated entities’ conduct” had an impact on interstate commerce. The court rejected CAI’s motion for a preliminary injunction to halt enforcement of the CTA because it concluded that CAI would be unlikely to succeed in this constitutional argument.
The bottom line for Associations is that they will need to file BOI reports under the CTA before the deadline on January 1, 2025. Future legislation (or even a regulatory exemption from the Treasury Department) might change how Associations report, but there will be no change before the end of the year.
Fortunately, Associations who have partnered with FinCEN Report have a worry-free solution. Our SOC-2 platform has been penetration-tested for security and is already working with tens of thousands of companies on their initial BOI reports. We encourage management companies and property managers to engage with us to get their compliance journey started.
