Corporate Transparency Act Disclosure Requirements Update

Oscar R. Rivera
March 18, 2024


Ruling Finds Corporate Transparency Act Disclosure Requirements Are Unconstitutional

A recent federal ruling has created some confusion for all those who have been following the new financial disclosure and filing requirements under the Corporate Transparency Act (CTA).

Earlier this month, the U.S. District Court for the Northern District of Alabama issued a final declaratory judgment in a case challenging the law that was brought by the National Small Business Association.  The court concluded that the CTA exceeds the Constitution’s limits on congressional power, and it ordered the U.S. Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN) to stop enforcing it against the specific plaintiffs involved in this particular case.

The ruling concluded that the CTA overstepped by imposing broad reporting requirements on a vast number of domestic entities based on the potential for misuse, without a direct and substantial connection to interstate commerce, foreign affairs, or national security.

Decision’s Impact on Future Filings

Community associations had previously been put on notice by attorneys and industry organizations that they were not exempt from the Act, and their directors and authorized agents would be required to comply with its mandates for financial disclosure filings by the start of 2025.  These new requirements are aimed at thwarting the misuse of the U.S. financial system and corporate entities for illicit purposes. The Department of the Treasury is likely to appeal the court’s order and ask for a stay pending its appeal.  As this case continues to unfold, community association directors and all others who are required to comply with the CTA’s disclosure filing should continue to do so.  A notice on the decision from FinCEN asserted the government’s authority to continue enforcing the CTA against all those who were not directly involved as a plaintiff, as the ruling applies only to them and there is no broad national injunction.

Our firm’s community association attorneys will continue to monitor this expected appeal, and we will provide updates in this blog as they become available.  We cover many important and timely topics for associations in the blog, and we encourage directors, property managers and owners to subscribe to our e-newsletter in order to receive all our future articles.