Government / Federal

Supreme Court reaffirms longstanding rules governing tax sales

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Sometimes my reaction to a court decision, even a Supreme Court decision, is just a sense of relief that the Court has reaffirmed that the law is what you have always thought it to be. The United States Supreme Court’s recent decision in Estate of Pung v. Isabella County is just that kind of decision. 

While the specific facts of the case contain exactly the kind of bad facts and stubborn behavior that sometimes lead Courts to fashion equitable remedies that really muddy the playing field, the Court focused on bare procedure and historical precedent to arrive at their result essentially affirming 100 years of legal procedure, but leaving the door open to the lower courts to judge the particulars concerning due process.

Scott Pung owned and occupied the home that was the subject of the case, before passing away in 2004. Several years after his death, the tax assessor for Isabella County declined to continue taxing the Pung home as a primary residence because the estate (or its heirs) did not follow proper procedure (as the assessor saw it) to file an affidavit establishing that the heir living in the property still qualified for the partial tax exemption.

The Pung estate successfully challenged the assessor’s decision for the tax years 2007-2011 before a Michigan state tax tribunal.  Despite Pung’s victory, the assessor apparently persisted in her position and denied the partial tax exemption for the 2012 assessment year.[1] The Pungs apparently failed to timely contest the tax assessor’s decision to deny the partial tax exemption again in 2012.

While the Pungs paid the 2012 tax bill assessing the home as a primary residence, but refused to pay the supplemental tax bill of $2,241.93.[2]  The County began proceedings to collect the unpaid tax through sale of the property. While there may be some question as the sufficiency of notices, the Pungs ultimately did not pay the tax, redeem the property, or otherwise take action to stop the sale. The home sold at public auction to a third party for $76,008.00. The appraised tax value of the property was approximately $195,000. 

The Pungs filed suit claiming that the tax sale did not realize the fair market value of the property. [3]  The Pungs asserted that the 5th and 8th Amendments required the state to compensate them for the fair market value if it wished to take their property to meet their tax sale. Astonishingly, the Pungs argued that the County, and by extension any government entity conducting a public sale, must make up the difference between the realized tax sale price at the auction and the fair market value of the property under ideal sale conditions. To put it more clearly, the Pungs argued that the County must pay them the roughly $120,000 dollars difference in what the tax sale actually yielded and what the Pungs asserted was the true value of the property. Essentially, they argued the County should pay them $120,000 for the privilege of collecting their $2,000 deficient tax liability.  

The Court unanimously rejected the Pung’s argument on both constitutional grounds. Citing the fact that the right of the state to liquidate property to pay tax debts dates back to colonial days and perhaps Magna Carta, the Court did not find anything compelling about the Pung’s arguments. 

While a tax sale may inevitably be a distressed sale in most real estate markets, the Court reasoned that the Pungs and any taxpayer has an opportunity to avoid such an outcome. With significant equity in the property, the Court noted that the Pungs could have borrowed money to redeem the property by paying the tax and that they alternately had ample time to market it themselves for a fair price.  

The Pungs may still have an opportunity upon remand to contest whether the County’s procedure was properly carried out and whether its actions were fair under the context of the previous litigation between the parties. But SC dirt lawyers and anxious title underwriters can rest easy knowing that what they understood was the rule forever will remain the rule going forward. Sometimes that’s a pretty good result.  

[1] Justice Thomas’s concurring opinion stated that the County’s advocate could offer no explanation for why the Assessor persisted in denying the partial exemption after the Tribunals reversal as to the prior tax years, but it apparently stemmed from the Pungs continued refusal to submit an affidavit establishing primary residency.

[2] Whether you consider the Pungs apparent refusal to submit the affidavit of residency to the assessor or pay the assessed tax over the next two years to be strongly principled or head-scratchingly foolish might depend on your readings of the facts.

[3] It is the rare foreclosure or distress sale that returns fair market value of a sale conducted under ideal conditions. There are as we know a more limited pool of bidders and title problems associated with these kinds of sales.

Cybersecurity Threats and Their Impact on Real Estate Transactions

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Imagine arriving at your real estate closing only to learn that the county’s property records are unavailable. If the documents can’t be recorded, then the transaction may be left hanging in the air. Depending on lender funding requirements, the closing attorney may not be able to disburse the funds, and the buyer may not be able to receive their keys until recording is available. It sounds far-fetched, but it’s exactly the type of disruption that recent cyber-attacks on county governments have made possible.

Most people never think about their county recording office until they’re buying or selling real estate. Deeds, mortgages, easements, plats, liens, and other documents are quietly recorded every day, creating the public record that establishes who owns property and what interests affect it. It’s a system that has worked for generations because it relies on one simple principle: the public records must be accurate, complete, and accessible.

Recent events in South Carolina serve as a reminder that this system is more fragile than many people realize.

A recent cyber attack disrupted access to property records and other county services, temporarily preventing normal operations. While the details of the investigation continue to emerge, the incident highlights just how dependent modern real estate transactions have become on digital access to public records. Unfortunately, this is not an isolated event. Several South Carolina counties have experienced technology failures, ransomware attacks, or other disruptions in recent years.

Cyber security, however, is only one challenge facing county recording offices.

Many counties across the state operate with limited budgets and skeleton crews. Employees often process hundreds of documents each day while balancing increasing demands and aging technology. Even the most dedicated public servants can struggle when resources are stretched thin. Under staffing and insufficient training increase the likelihood of recording errors, indexing mistakes, or delays in processing documents – all of which can create headaches for property owners years later.

The integrity of the public record is essential because virtually every real estate transaction depends on it.

Before issuing title insurance, conducting a closing, or approving a mortgage loan, attorneys and title professionals examine the public records to confirm ownership and identify any issues affecting the property. They are looking for deeds that properly transferred title, unreleased mortgages, judgments, tax liens, easements, restrictive covenants, and countless other matters that could affect ownership rights.

If those records are unavailable because of a cyber attack, the transaction may be delayed. Buyers may not be able to close on schedule. Sellers may miss contractual deadlines. Lenders may refuse to fund loans until title can be verified. Even a short interruption can create significant inconvenience for everyone involved.

More concerning are situations where records have been altered, corrupted, or improperly indexed. The public recording system functions because people can trust that what they find is complete and accurate. Preserving that trust requires not only secure computer systems but also adequate staffing, proper training, and ongoing investment in the offices that maintain these records.

Although county governments bear much of the responsibility for protecting these systems, cybercriminals often gain access through surprisingly simple methods.

Many cybersecurity incidents begin not with sophisticated hacking tools but with social engineering. Rather than attacking computers directly, criminals manipulate people into providing passwords, opening malicious attachments, or clicking fraudulent links. These phishing emails are designed to look legitimate and frequently impersonate trusted organizations, coworkers, financial institutions, or government agencies.

While this blog focuses on real estate law, cyber attacks and scams aren’t limited to real estate transactions. Anyone, not just government employees, can become a target. A few simple precautions can dramatically reduce the risk of becoming a victim. Be cautious of unexpected emails requesting urgent action. Verify unusual requests through a separate phone call or trusted contact information rather than responding directly to the email. Avoid opening attachments or clicking links unless you are confident they are legitimate. Enable multi-factor authentication (“MFA”) whenever possible, and keep software updated to address known security vulnerabilities.

These habits protect more than your personal information. They help protect the institutions that communities depend upon every day.

County recording offices rarely make headlines when everything is working properly. Yet they perform one of the most important functions in our legal system by preserving the history of property ownership and ensuring that buyers, sellers, lenders, and attorneys can rely on the public record.

As counties continue modernizing their technology, cybersecurity must remain a priority. At the same time, we should not overlook the importance of investing in the people responsible for maintaining these records. Secure systems, well-trained staff, and accurate public records are not simply administrative conveniences: they are essential to protecting property rights and keeping South Carolina’s real estate market functioning smoothly.

HUD changes guidelines for emotional support animals

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The Fair Housing Act prohibits housing providers from discriminating against individuals based on their physical handicaps. In addition, the Act requires that housing providers make reasonable accommodations to their rules and policies when an adjustment of a policy is necessary for a disabled person to have an equal opportunity to use and enjoy the offered housing.    

One fairly uncontroversial example of a reasonable accommodation is the case where a blind person has the assistance of what we might have once called a seeing-eye dog. These are trained animals that provide specific and essential services to persons with clear disabilities. A “no pets” policy cannot be applied to prevent the disabled person from having the assistance of such an animal under the Act.  

But in recent years there have been a growing number of more controversial accommodations requested where the disability of the applicant is not as easy to verify and the support animal itself is not particularly a trained animal specialized to the problem. Many people seeking these accommodations report that they suffer from mental issues such as anxiety, depression or post-traumatic stress and that their issues are much relieved when they have emotional support animals.

Landlords and management companies have had a great deal of trouble determining where the line lies between untrained “support animals” and simple pets. It’s become something of a cliché in comedy and pop culture. For instance, Homer Simpson’s emotional support pig, Plopper, who went from pet to emotional support animal in order to avoid his wife Marge’s urge to declutter.   

HUD’s previous guidance on the subject placed the housing providers in a precarious position as both medical providers and online services have made obtaining emotional support certifications for untrained animals reportedly fairly easy to obtain.  Landlords who attempted to enforce “no pets” policies were thus placed in the position of facing the cost and time of justifying their accommodation denials in HUD enforcement actions.

At the end of May HUD announced that it was amending its policy concerning reasonable accommodations for support animals.  According to the new directive, HUD’s Office of Fair Housing and Equal Opportunity will now pursue charges only in those reasonable accommodation requests involving trained support animals that perform specific tasks for disabled persons.  

While the guidance only applies to the way HUD will process complaints and does not affect the ability of individuals to pursue their own lawsuits under the Act, the change in guidance likely will significantly decrease the number of agency level actions against housing providers by the Department. Certainly it would seem likely that fewer individuals will have the resources or desire to pursue lawsuits on their own.  The change in HUD’s guidance may give some insight as to how future rulemaking may develop and it may well impact the way that Courts interpret the Act. 

Georgia Real Estate Investor Fined for Violating OFAC Sanctions

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Imagine that you have a real estate investor client who purchased a big house in a gated community at a foreclosure sale. The client then took out a mortgage on the house, paid to make significant repairs and renovations, and ultimately signed a contract to sell it on to a third party. Then, all of a sudden, the Federal government sends your client a cease and desist order, a subpoena, and eventually fines him $4,677,552.00 for violating OFAC (Office of Foreign Asset Control, an agency of U.S. Treasury) sanctions against a family member of a Russian oligarch. Does that sound fun to anybody? Unfortunately, that is more or less what happened to one real estate investor in Atlanta who unknowingly bought a house which was, in fact, owned by a person who was on the OFAC sanctions list.  

This particular person whose name appeared on OFAC’s sanctions list is now known as Karina Rotenberg. She is a family member of a Russian oligarch who was identified for US financial sanctions after Russia invaded Ukraine. For a time in the early 2000’s, she lived and worked and owned homes in Atlanta. At the time, her name was Karina Fox. Guess which last name her Atlanta home is owned under? That’s right – it’s Fox.

Well, it just so happened that, after it added her to the sanctions list, OFAC figured out that Ms. Fox/Rotenberg owned property in Atlanta. This means that her property could not be sold, mortgaged, or otherwise transferred, since doing so would be a violation of the sanctions. OFAC sent a notice to the Fulton County Clerk of Court specifically mentioning the property’s address, and listing several names by which Ms. Fox/Rotenberg was known (including both “Fox” and “Rotenberg”), and asked the Clerk to file the notice in the county records to let the public know that the OFAC sanctions existed. And the Clerk of Court did file that notice. Unfortunately, for reasons which are not clear, the Clerk appears to have only indexed the notice under the name Rotenberg. So, a title searcher who did not know that Karina Fox and Karina Rotenberg are the same person would not necessarily know that this home was owned by a person on the OFAC sanctions list.

Now, here comes our local real estate investor, by all accounts an entrepreneurial fellow who had immigrated from India and worked to further his education and succeed in this county. He operated his real estate deals through an LLC: King Holdings LLC. Most of his past deals had been smaller single-family homes that he had bought in distress, improved, and flipped for a profit. This home would be bigger than most of his past projects. But it was being sold at foreclosure and seemed like a bargain. King Holdings buys the home at foreclosure sale in January 2023.

Around April of 2023, OFAC learns about the foreclosure, and tracks our investor down. He says that an OFAC investigator called him on his cell phone and told him that he should not be doing anything with the home, due to the sanctions. In our investor’s version of the story, the caller seemed sketchy, and he says he wondered at the time if it was a scammer trying to scare him into giving up some personal information.  

Our investor goes ahead and mortgages the property to have funds to begin renovations. The law firm which closed the mortgage says it searched title to the home and did not find the OFAC notice (which, again was indexed in a different name, Rotenberg).

By December, 2023 our investor has learned that this home has significantly more repair/maintenance problems than he’d bargained for. He is beginning to think it was not such a great deal. He signs a contract with a third party to sell the home. After initially listing the property for $2.5M, he finally signs a contract to sell it for $1.4M.

In February 2024, OFAC issues a cease-and-desist order and administrative subpoena to our investor, restating the sanctions and requiring that he immediately stop doing anything with the home. The subpoena also demands information on all dealings involving the property since January 2023. It seems that our investor certified the accuracy of a response that disclosed the renovation work but did not say anything about the property’s listing and pending sale.

In March 2024, our investor closed the $1.4 million sale of the property to the third party buyer.

OFAC took the position that pretty much everything our investor did violated OFAC’s regulations/sanctions. (I also get the sense that they were pretty mad about him not disclosing the sale, and then going ahead with the sale to the third party, after OFAC had issued their cease-and-desist order.) So, as punishment, OFAC imposed the $4,677,552.00 fine on him personally.

It is really disappointing that the Clerk of Court did not index the OFAC notice under all the names that OFAC had listed. Another possible way this could have been avoided is if our investor had checked the OFAC sanctions list before proceeding. This is a great tool that all our CTIC agents should be using too – it could even help you save a client from ending up like our Atlanta investor!

FNF challenges FinCEN Rule and ALTA concurs

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In our previous blog entry, Jennifer Stone did a great job of summarizing FinCEN’s new Anti-Money Laundering Rule that is scheduled to go into effect as of December 1, 2025. In short, the Rule will generally require South Carolina real estate attorneys to make reports to FinCEN concerning every residential (1-4 Family property) transaction where 1) the grantee is an entity or trust and 2) there is no financing provided by a lender that is subject to federal anti-money laundering reporting obligations. 

The closing attorney will be on the hook (under threat of civil and criminal liability) to collect extensive information from the parties to the transaction, including the names and addresses of every person or entity who has a beneficial interest in or control over the grantee entity. Generally speaking, the collection of information is well outside the scope of the usual real estate closing and places the burden on attorneys and title companies to collect information from third parties who may not be willing to share that information.

However, there is still the possibility that the Rule will not go into effect as scheduled in December. This past May, Fidelity National Financial, Inc. (“FNF”), the parent corporation of Chicago Title, filed suit in federal court challenging the Rule and thereby taking the lead role in speaking up on behalf of attorneys and title agents in advocating for more measured, less burdensome requirements and reporting.

In the lawsuit, FNF has requested an injunction suspending FinCEN’s enforcement of the Rule. A hearing is currently scheduled to be heard on September 30, 2025.

FNF also filed a Motion for Summary Judgment to which the American Land Title Association (ALTA) recently expressed its support by filing an amicus brief. ALTA, of course, is the most prominent trade association of title insurance companies and title agents in the United States.

While FinCEN asserts that the cost to the title industry (including closing attorneys) of meeting the reporting requirements could reach as high as $600 million annually, ALTA’s brief argues that FinCEN has significantly underestimated the training and collection time necessary to comply and that the true cost to the industry will be significantly higher. ALTA argues that the this significant burden cannot possibly be outweighed by the corresponding benefit to law enforcement. ALTA points out that FinCEN drastically reduced the scope of the reporting of Beneficial Ownership Information (BOI) under the Corporate Transparency Act (which we wrote about here) in part because the new administration believed that reporting on American formed entities was of limited value to law enforcement.

ALTA further argues that the reporting burden under the Rule will disproportionately fall on small businesses that are “ill equipped” to absorb the additional costs and regulatory burden of reporting in an industry with already thin margins. I think many South Carolina residential real attorneys with already thinly stretched teams would agree wholeheartedly with ALTA in that statement. 

Certainly, there are quite a few miles to go with this lawsuit before a final verdict is rendered concerning the new Rule. We will continue to keep an eye on the progress of this case, but for now South Carolina attorneys must continue to develop procedures for complying with this Rule when it goes lives on December 1. 

FinCEN’s Anti-Money Laundering Regulations for Residential Real Estate Transfers: Who, What, How & When?

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At this point we should have all heard about FinCEN’s Anti-Money Laundering rule, but details may still be fuzzy. Let’s break down the information available to prepare for what appears to be a new reporting requirement intended to go into effect December 1st, 2025! That’s right! As of this article, reporting obligations begin THIS YEAR!

FinCEN’s Anti-Money Laundering Rule applies to any non-financed transfer of any residential real estate to a legal entity or trust. This includes transfers that occur anywhere in the U.S., including Puerto Rico and overseas territories. Keep in mind that this rule covers “transfers” – not just sales. There is no minimum purchase price to trigger this reporting requirement.

There are several key words in this first sentence. 

“Non-Financed” – Specifically, FinCEN is targeting transactions where there is no loan secured by transferred real estate, AND the loan is not made by a financial institution with an anti-money laundering program and an obligation to report suspicious transactions.  

So, in the inverse, if you have a transfer that is a cash purchase or involves private equity lending or even hard money lenders, this will trigger the reporting obligation.

“Residential Real Estate” – What is residential real estate? This seems like it should be a pretty straightforward question with an expected response.  Here are certain types of residential real estate that FinCEN includes within these regulations:

  • A residential property with a 1-4 family structure 
  • Vacant land on which buyer intends to build 1-4 family structure
  • Condo or co-op
  • Apartment buildings or mixed use with a 1-4 family structure (existing or to be built)

However, how do you determine buyer’s intended use of the property? Will the inclusion of commercial aspects of use affect reporting requirements? We may not see many properties that combine residential and commercial use, but, especially in more rural areas, there are sites on which a business owner both lives and maintains a commercial structure such as a workshop or garage.

“Legal Entity or Trust” – This is pretty broad language. We can probably all agree on the most common types of entities that hold property, including corporations, limited liability companies, general partnerships and limited partnerships. These are easy to recognize in connection with a non-financed transfer or residential real property. The second part, or the “Trust” component of this term, is generally understood, as well, and is intended to include the basic understanding in South Carolina that, although a trust is a legal fiction, a trustee of a trust can hold title to real property in South Carolina apart from the individual rights of that trustee, the grantor/settlor or the beneficiary(ies) of the trust. For purposes of FinCEN’s rule, a transferee trustee does not include (i) a statutory trust); (ii) a trust that is a securities reporting issuer; or (iii) a trust in which the trustee is a securities reporting issuer. Other exclusions from FinCEN’s definition of trust transferee include a governmental authority, a bank or credit union and a public utility.

Exemptions!!!

There are certain exemptions to FinCEN’s reporting requirements under these regulations, including the grant, transfer or revocation of an easement or property subject to a reverse 1031 exchange1. Other exemptions may include:

  • A transfer pursuant to the terms of Last Will, testamentary trust, by operation of law or contractual obligation following the death of an individual;
  • A transfer incident to divorce order;
  • A transfer to a bankruptcy estate; and
  • A transfer supervised by a court in the United States (possible a forfeiture).

Who is the Reporting Person?

There is a list of priorities for who is to be the reporting person for purposes of these regulations. First is the settlement agent named on the settlement statement. FinCEN does not note a difference between an attorney settlement agent and a non-attorney settlement agent. The second choice for a reporting person is the person that prepares the settlement statement. The third choice is the person that records the deed in the public records. The fourth option is the person that issues the owner’s title insurance policy. Fifth is the person that dispenses the greatest amount of funds. Sixth choice is the person who examined title and the final and seventh option is the person that prepared the deed.

I can imagine so many unforeseen and unexpected problems arising from placing reporting obligations upon the individuals that might find themselves on the foregoing list. Other than a settlement agent, or perhaps the person preparing the settlement statement if that person has been specifically allocated the duty to report under these regulations, these individuals could be people that have never heard of these regulations or the type of reporting requirements that have now been legally assigned to them. A prime example could be a deed from a parent as grantor to a family estate planning entity or other estate planning transfer where a real estate attorney might not be involved. If there is no settlement agent and no settlement statement prepared, as between the parties (grantor/grantee/trustee?), whoever records the deed now has the obligation to report this transfer to FinCEN.  

What must be reported?

There has been a lot of discussion of what type of beneficial ownership information must be reported and disclosed, so I won’t go into that in this article, but what other information must be reported? Certain payment information must be reported to FinCEN under these regulations including (i) the amount of any payment made, (ii) the form of payment, (iii) the name of the payor if the payor is not the transferee entity or trust and, (iv) if the payment comes from a financial institution, the name of that institution and the account number.

When must the report be submitted? The report is due to FinCEN by the last day of the month after the date of closing. For example, if the transfer occurs on February 28th, reporting is due by the last day of March that same year. However, it is particularly important to gather all information needed for a full and complete report prior to closing. We know once the transfer is complete, it is difficult to get additional items from the parties to the transaction. However, when pressed by ALTA for a “good faith” basis of approval for a partial or incomplete report, FinCEN did not bite.  FinCEN maintains that their “Reasonable Reliance Rule” addresses concerns over difficulty to obtain all information necessary to fully report the transfer.

What is the Reasonable Reliance Standard/Rule? FinCEN says that absent knowledge of facts that reasonably call into question the reliability of the information provided, a reporting person may rely on information provided, including buyer’s intended use of the property (for residential purposes?) and for lenders’ qualifications (do they hold themselves out to have an AML program and be subject to obligatory reporting?). However, BOI must be certified to the reporting person!

What if you do not report under these regulations? Violations of these regulations include both civil and criminal liabilities and penalties. These are the normal violations and penalties under general FinCEN regulations and not special to the AML Regulations but can be severe. Criminal penalties can result in financial obligations and prison time and civil penalties, which accrue for each separate willful violation range from $25k to$100K and violations for negligence are not to exceed $500 or $50k if a pattern of negligence is found. This is not all-inclusive of the repercussions for violations of these reporting regulations, but definitely something to get your attention!

How can we prepare? 

Although we do not have FinCEN’s final real estate report that real estate professionals can use to report information for each covered transfer, as I stated at the beginning of this article, the reporting period begins December1, 2025. This means that people involved in residential real estate transfers to legal entities or trusts that may not involve financial institutions subject to federal anti-money laundering programs and reporting duties need to begin studying these regulations and to afford time and resources for training to know what information to collect, how and from whom to collect it, and how and when to report it.

  1. While there may be an exemption in a standard 1031 exchange depending on the deal specific facts, this potential exemption is intended for reverse 1031 transactions where the replacement property is transferred to an entity accommodation titleholder during the course of the overall 1031 exchange transaction. ↩︎

Corporate Transparency Act Whack-a-Mole

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I have written many words about the Beneficial Ownership Information (BOI) reporting requirement of the Corporate Transparency Act (CTA) over the last couple of years and much of my writing has been rendered obsolete by events. So, it came as no surprise on March 21, 2025, when the world changed again, but even I wouldn’t have thought they’d have done the CTA like they done.    

If you want to get to the meat of the latest development, you can skip ahead to the end of this lengthy entry, but for those of you that need a refresher or those that just want to watch me work through my feelings a bit, the next few paragraphs are for you. 

Readers of this blog probably know by now that Congress passed the CTA some years ago for the stated purpose of assisting law enforcement agencies in preventing bad guys (foreign and domestic) from laundering money and hiding assets in the United States using shell companies. In its wisdom, Congress decreed that almost any entity registered with a Secretary of State’s office must file a report detailing the significant stakeholders in the entity and where they might be found.

Under the Biden Administration, the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury, came up with a framework of rules, processes, and penalties covering the duty of entities to report BOI. New companies would have 30 days to report the required BOI information to FinCEN; all existing entities would have to make their report by January 1, 2025. 

However, the whole thing did not go off as smoothly as planned for FinCEN.  Across the country (but most especially in Texas) plaintiffs filed lawsuits challenging the reporting requirement as unconstitutional or at least very inconvenient and burdensome. Before FinCEN could even think about imposing its first fine, a Texas federal court entered an injunction enjoining FinCEN from enforcing the BOI reporting requirement while the parties litigated the constitutionality of the Rule.  Game Off!  

The Government appealed this ruling to the Federal Court of Appeals for the Fifth Circuit, which initially removed the injunction. Game On! 

But, just a few days later, the same Court of Appeals, reinstated the injunction.  Game Off!  

The Government (by this time the Trump Administration) remained dogged in its defense of the reporting requirements and appealed the matter to our highest court. There, the United States Supreme Court ultimately sided with the Government and rescinded the injunction in the first Texas case. Game On!  However, by this time a second Texas federal district court had entered its own nationwide injunction against enforcement of the Act. Game Off!  

More time passed, additional words were written, and additional hearings were held, but eventually this other Texas federal district court decided that despite the impassioned argument of the Plaintiffs it did not have authority to ignore the persuasive authority of the Supreme Court’s previous ruling in a nearly identical case. Subsequently, the Texas court (I would like to imagine) somewhat sulkily rescinded its injunction. Game On! Likely a joyous party continued into the wee hours in the FinCEN offices the day it announced that BOI reporting was back, and that the deadline for reporting would for certain be March 21, 2025.  

However, this is the year 2025, and this the Corporate Transparency Act we are talking about, so it was not so simple for the good folks at FinCEN. On February 21, 2025, FinCEN issued a press release indicating that despite the Government’s vigorous effort to defend the Rule all the way the Supreme Court, that it did not plan to enforce the Rule. The press release indicated that FinCEN planned to issue an Interim Rule before the March deadline, but the FinCEN website still promised fines and penalties for anyone failing to comply. Game Off?

On March 21st, FinCEN issued an Interim Rule that dramatically changed the scope and application of the Rule. First, the Interim Rule specifically exempts United States entities from BOI reporting requirements.  Second, the Interim Rule provides that foreign entities registered to do business in the United States need not report any information about its beneficial owners that are United States individuals. Third, the reporting deadline for foreign entities to file BOI reports was extended to 30 days from the effective date of the Interim Rule.

The Interim Rule certainly reduces the theoretical usefulness of BOI reporting to law enforcement as FinCEN’s database will now only contain information about foreign entities that register in the United States and their foreign beneficial owners. Criminals inclined to set up shell companies to hide their illicit assets probably would be well advised to use entities formed in the United States if that isn’t what they were doing before. Perhaps, the Interim Rule is arguably not what Congress intended, but there is a lot of that going around.

Practically, the reduction in the scope of the Rule will diminish the relevance of the CTA to real estate lawyers. Those attorneys that represent foreign entities doing business in the United States will need to be prepared to advise clients of the reporting requirements that go along with registering their foreign entity in the U.S., but those attorneys representing entities formed in the United States can likely breathe a long sigh of relief.  At least for the moment.

Following injunction, FinCEN announces compliance with CTA is voluntary

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On December 3, the United District Court for the Eastern Division of Texas granted a nationwide preliminary injunction that prohibits the federal government from enforcing The Corporate Transparency Act.

In response, the United States Treasury Financial Crimes Enforcement Network (FinCEN) announced on December 9 that while the injunction is in place, compliance with the CTA is only voluntary.

The Corporate Transparency Act, which went into effect January 1, 2024, requires many companies to report beneficial ownership information to FinCEN. Beneficial ownership information is defined as identifying information about the individuals who directly or indirectly own or control a company. The deadline for entities created before January 1, 2024 was January 1, 2025

Lawyers have been scrambling to grasp the intricacies of the new law and to assist their corporate clients, including homeowners’ associations, in compliance.

Six plaintiffs filed the lawsuit in May challenging the constitutionality of the law. The decision is based on the Commerce Clause, and the statute is based on national security and aimed at enforcing laws against money laundering.

This case will surely go to the Supreme Court, and we will have to wait to see how that Court reacts. It is possible that the rationale for the legislation holds for some but not all entities. Homeowners’ associations seem to be likely candidates to dodge this particular bullet.

In the meantime, your clients are not required to comply with the new law.

Court grants nationwide injunction against enforcement of CTA

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The Corporate Transparency Act, which went into effect January 1, 2024, requires many companies to report beneficial ownership information to the United States Treasury Financial Crimes Enforcement Network (FinCEN). Beneficial ownership information is defined as identifying information about the individuals who directly or indirectly own or control a company. The deadline for entities created before January 1, 2024 is January 1, 2025.

Lawyers have been scrambling to grasp the intricacies of the new law and to assist their corporate clients, including homeowners’ associations, in compliance.

But we have a huge development.

On December 3, the United District Court for the Eastern District of Texas granted a nationwide preliminary injunction that prohibits the federal government from enforcing the new law.

Six plaintiffs filed the lawsuit in May challenging the constitutionality of the law. The decision is based on the Commerce Clause, and the statute is based on national security and aimed at enforcing laws against money laundering. This case will surely go to the Supreme Court, and we will have to wait to see how that Court reacts. It is possible that the rationale for the legislation holds for some but not all entities. Homeowners’ associations seem to be likely candidates to dodge this particular bullet.

Department of Justice takes last-minute action against NAR Settlement

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On November 24, just 48 hours before the National Association of Realtors’ settlement agreement headed to final approval, the Department of Justice filed a statement of interest in the lawsuit.

The filing indicated that the DOJ did not participate in the underlying litigation, but it challenged the settlement’s provision that requires buyers and buyers’ agents to enter into a written agreement before touring a home. This provision raises concerns under antitrust laws that could be addressed in multiple ways, according to the DOJ’s statement.

The DOJ suggested rectifying the issue by eliminating the buyer broker agreement requirement or to disclaim that the settlement creates any immunity or defense under the antitrust laws. Otherwise, the court could clarify that the settlement approval affords no immunity or defense for the buyer-agreement provision. The DOJ believes the settlement could limit the ways buyer brokers compete for clients.

The final hearing is scheduled for November 26 in Missouri. The NAR said in a statement that it will advocate for a final settlement that day. The statement suggested that the settlement is not what the NAR wants, but that it is preferable to continued litigation and the uncertainty of a jury verdict.

We’ll see lots of news on this topic this week and next week!

In the meantime, Happy Thanksgiving wishes for you and your family!