Gordon Rees Scully Mansukhani is at the forefront of a significant legal battle concerning the Corporate Transparency Act ("CTA"), leading a landmark case that will have wide-reaching implications for community associations nationwide. Led by GRSM Partners Damon Wright, Clair Wischusen, and Gretchen Sperry, with valuable support from Associate Mary Goers, the case was brought on behalf of the Community Associations Institute, a community association advocacy organization and several of its member community associations. The case advances statutory, administrative process, and constitutional claims, including that the CTA should be interpreted to exempt community associations like other nonprofits and, alternatively, that the CTA is unconstitutional as applied against community associations.
Congress enacted the CTA to combat money laundering and terrorist financing through the creation of a comprehensive law enforcement database about the beneficial owners of entities doing business in the United States. Except with respect to certain entities exempt by statute, the CTA requires that entities file and update informational reports about their beneficial owners with the U.S. Treasury's Financial Crimes Enforcement Network or otherwise face civil and criminal penalties of up to $10,000 and two years imprisonment. In FAQs issued earlier this year, the U.S. Treasury's Financial Crimes Enforcement Network indicated that the beneficial owners for community associations would include their volunteer board members.
As emphasized in the case, the administrative burden, privacy concerns, and potential liability imposed by the CTA threaten the future of community associations, their leadership, and their communities.
"About 30% of all U.S. residents live in homeowner, condo, or other community associations, with most run by volunteers doing what's already a challenging, often thankless job," said Wright. "Tired from their day job, they come home having to deal with everything from disputes among neighbors to making sure the pool gets fixed. These volunteers never thought they'd also have to share their personal information with a law enforcement database or could be prosecuted if they or other board members failed to update their information. It's hard to imagine any community association would be involved with money laundering or terrorist financing. But if we don't get relief, it's easy to imagine many volunteer board members resigning and many community associations losing their leadership. We brought the case to make sure this doesn't happen."
The preliminary injunction motion is scheduled for a hearing in the U.S. District Court for the Eastern District of Virginia on October 11, 2024.
The case highlights GRSM's continued leadership in addressing complex legal challenges across a variety of practice areas, including constitutional law, corporate law, regulatory compliance, and nonprofit governance. The firm's deep experience in these sectors makes it uniquely positioned to navigate the intricacies of cases involving regulatory hurdles and public policy concerns.
This case was featured in a Law360 article published on September 12. Read the full Law360 article. Subscription may be required.
Access GRSM's legal alert for more insights on the Corporate Transparency Act.