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.