In June 2024, the CAI Board of Trustees approved filing a lawsuit to exempt and protect community associations from burdensome requirements outlined in the Corporate Transparency Act. The suit challenging the U.S. Department of Treasury's restrictive obligations underscores CAI's unwavering commitment to protecting the community association housing model and its members' interests.
CAI firmly believes the act's requirements place an excessive burden on community associations, which operate differently from traditional corporations and small businesses. The lawsuit is expected to be filed this summer. Updates on significant milestones and developments will be provided to
members as they occur.
CAI believes community associations should not be subjected to the same reporting requirements as corporations and LLCs because they operate differently and are nonprofit entities governed by homeowners.
Compliance with CTA will present a measurable, significant burden on volunteer leaders throughout the nation. Associations will be forced to collect personal information, turn it over to the federal government and update it on an ongoing basis to comply with current reporting requirements. The burden of reporting such information is likely to have a chilling effect on volunteerism. Association boards also will incur high administrative costs to comply with the law.
The Corporate Transparency Act (CTA) was signed into law Dec. 2020 and is now in effect for many community associations. This law will require community associations with fewer than 20 employees and less than $5 million in annual revenue to disclose beneficial owners’ information to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
The Corporate Transparency Act
While we support the goal of stopping money laundering and funding schemes for terrorist activity, this is not good public policy for community association boards of directors. CAI believes community associations were unintendedly caught up in this law which is intended for corporations laundering money for terrorist activity. Failure of a volunteer community association boards to comply—intentional or not—could result in up to $10,000 in fines and up to two years in prison.
Furthermore, the information is already being collected and would simply require collaboration between FinCEN and the IRS.
We learned from the National Small Business Association (NSBA) lawsuit that “association standing” protects all members of the organization in the lawsuit. If CAI’s lawsuit is successful in exemption community associations from the corporate transparency act, it is very possible the exemption will only apply to community associations that are members of CAI. Join today!
Help CAI fight the Corporate Transparency Act!
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NOTE: Should community associations be prepared to file by Dec. 31 if the lawsuit is not resolved or the law has not changed?Yes, community associations should be prepared to comply with the act and file the required beneficial ownership information by Dec. 31 if the lawsuit is not resolved or the law has not been amended. While the CAI is actively pursuing legal action to seek an exemption, it is prudent for associations to prepare to comply to avoid potential penalties and ensure they meet all legal requirements.
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