The Association of Community Associations filed a court brief arguing that the Corporate Transparency Act was never intended to reach the nonprofit, volunteer-led boards that govern 373,000 community associations.
A law aimed at catching criminals hiding behind corporate structures could impact neighbors who just want to adjust their pool schedule.
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A federal anti-money laundering law known as the Corporate Transparency Act (CTA) is inappropriately applied to nonprofit homeowners and condominium associations, according to an amicus brief filed with the U.S. Supreme Court by the Association of Community Associations (CAI). CAI argues that the law “creates an unnecessary administrative burden and is disincentive.”[s] Homeowners no longer need to volunteer to contribute to the community. ”
Dawn Bauman
“Nearly one in four Americans lives in more than 373,000 neighborhoods across the country, community-managed nonprofit organizations run by volunteer homeowner board members who help maintain roads, stormwater systems, landscaping, pools, lighting and other shared infrastructure and municipal-like services that residents rely on every day,” said Dawn M. Bauman, CEO of CAI. “CAI believes Congress never intended volunteer-led neighborhood associations to be treated the same as anonymous shell companies engaged in money laundering and other illicit financial activities.”
Bauman said the CTA was passed in 2021 and shortly thereafter CAI recognized that nonprofit community organizations were being inadvertently caught up in its enforcement “despite the low risk of illicit financial activity.”
Member organizations then appealed to members of Congress and their staff to consider exemptions, filed formal requests for exemptions with the Treasury Department, and ultimately filed amicus briefs arguing that the association was outside the intended scope of the law.
The law would require volunteer directors to submit uploaded identification documents to the Financial Crimes Enforcement Network, in addition to personal identifying information such as name, address, date of birth, and driver’s license or passport information. Failure to comply can subject associations and officers to civil and criminal penalties of up to $10,000 and two years in prison.
“There is regular turnover on community association boards as homeowners come and go from the board through elections, resignations, transfers, etc.,” Bauman said. “This creates unique challenges under the CTA because, unlike traditional corporations with paid executives, compliance departments, or in-house legal teams, neighborhood associations are nonprofit organizations run primarily by volunteer homeowners. Frequent board turnover requires beneficial ownership filings to be continually updated, and can place ongoing compliance responsibilities on volunteers with no commercial or compliance functions.”
Bauman said CAI is also concerned that the law could prevent volunteers from serving on HOA or condominium boards, citing privacy concerns and potential civil and criminal penalties.
Bauman said her organization has not conducted a formal cost study, but CAI estimates that compliance can result in “hundreds to thousands of dollars in additional legal, administrative, and administrative costs annually associated with attorney reviews, updated information submissions, and ongoing compliance obligations.”
Additionally, the CAI notes privacy concerns related to “intrusive disclosures of personal information, who may access the data, under what circumstances the data may be shared, and whether sufficient privacy protections exist for volunteer board members.”
According to a 2024 Snap Survey of 951 community associations by the Community Association Research Foundation, 81% of members surveyed believe CTA reporting requirements could make it difficult for community members to volunteer, and 72% believe the requirement could increase turnover and lead to board members resigning.
Email Christy Murdoch
