CAI Files Lawsuit Against the U.S. Department of Treasury 

By Dawn Bauman
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On September 10, 2024, Community Associations Institute filed a lawsuit against the United States Department of Treasury challenging the application of the Corporate Transparency Act beneficial ownership interest filing requirements on community associations.

After extensive efforts to work with the U.S. Department of the Treasury and the Financial Crimes Enforcement Network and to lobby for the securing of an exemption, CAI filed a lawsuit against the Treasury Department.

The lawsuit challenges the application of the CTA to community associations and highlights several key issues:

  1. Exemption from the Corporate Transparency Act: Communities should be exempt from the act’s reporting requirements, as they are considered nonprofit organizations under section 528 of the IRS code.
  2. Improper Rulemaking Procedures: FinCEN issued FAQs without following proper notice-and-comment procedures required by the Administrative Procedure Act, making these rules invalid.
  3. Arbitrary and Capricious Action: FinCEN’s refusal to exempt community associations from the CTA is arbitrary and capricious, as it fails to consider the low risk of illicit financial activity by such entities.
  4. Constitutional Violations: The act violates communities’ constitutional rights under the Fourth, Fifth, and Ninth Amendments by requiring invasive personal disclosures without adequate privacy protections or sufficient cause.
  5. Overreach of Federal Powers: The act unlawfully usurps state authority to regulate corporate formation and governance, exceeding the federal government’s constitutional powers.
  6. Equal Protection Violation: The act discriminates against community associations by not exempting them as nonprofit organizations, unlike similar entities under section 501(c) of the IRS code.

To protect our members, CAI seeks a judicial review of our exemption request and asks the court to declare the act inapplicable to community associations. Alongside this, CAI has filed for a preliminary injunction to halt the application of the act until a final court ruling is made.

The Corporate Transparency Act deadline for compliance of January 1, 2025 remains and community associations should be prepared to file. For more information and to stay informed, visit www.caionline.org/cta.

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Dawn Bauman

Dawn Bauman, Chief Strategy Officer. As CAI’s lead advocate for federal and state legislative and regulatory affairs, Dawn works with volunteer leaders throughout the country serving on CAI legislative action and government affairs committees to advocate for strong and sensible public policy for America’s community associations.