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Federal Court Finds Corporate Transparency Act Unconstitutional: What Do Illinois Community Associations Need to Know?

Date

March 13, 2024

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2 minutes

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A recent federal court ruling has cast doubt over the Corporate Transparency Act (“CTA”), a federal law that broadly imposes certain reporting requirements by January 1, 2025 and applies to most condominium and community associations and co-ops.  Click here for LP’s general primer on the CTA and click here for LP’s primer on the CTA specifically for Illinois community associations. The case, captioned National Small Business United, d/b/a National Small Business Association, et al. v. Janet Yellen, et al., Case No. 5:22-cv-01448-LCB (N.D. Ala.), was filed by the National Small Business Association (“NSBA”) on behalf of its members.  In the 53-page decision (available here), a U.S. District Court in the Northern District of Alabama ruled that the CTA exceeds Congress’ authority and is thus unconstitutional. 

The ruling is significant but does not spell the end of the CTA altogether, at least not yet. First, the ruling is of limited applicability in that it only suspends enforcement of the CTA against the plaintiff in the case (members of the NSBA); it does not apply broadly to entities that are not a party to the case.  Second, it appears likely that the ruling will be appealed and that additional challenges to the CTA will be filed on the heels of this case. Third, it is possible that the CTA will be amended to address the issues raised by the recent ruling.

Clarity regarding the fate of the CTA, including the need for condominium and community associations and co-ops to comply with its reporting requirements, is expected in the coming months ahead of the January 1, 2025 reporting deadline. For now, the CTA and its reporting requirements remain in effect (except for the plaintiff in the case). As such, condominium, community association, and co-op boards should (i) be aware of this development in the law; and (ii) barring any changes, continue to work with their accounting, management, and legal professionals to prepare for the reporting deadline.

LP is committed to keeping our community association clients informed of, and prepared to proactively and successfully navigate, any changes in the law. For questions regarding the CTA, including reporting requirements, or other issues facing your condominium or community association or co-op, please contact Howard Dakoff, Laura Marinelli, Adam Kahn, or Molly Mackey of LP’s Community Association Group.

For additional resources regarding the CTA, including compliance requirements, filing deadlines, and Beneficial Ownership Information Report instructions, please visit LP’s Corporate Transparency Act Resources.


Filed under: Community Association

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