The Corporate Transparency Act (“CTA”) has been the hot topic of discussion among HOA industry professionals, with many having concerns as to who will handle the registration process and updates. But has this concern been for naught? Possibly, as a federal court in Alabama has recently ruled that the CTA is unconstitutional.
On March 1, 2024 the District Court for the Northern District of Alabama issued a 56-page ruling concluding the CTA is unconstitutional because Congress exceeded its power by enacting it. The District Court specifically made note that the federal government may only exercise powers granted to it by the Constitution; the government argued it had authority under three clauses of the United States Constitution: 1) Foreign Affairs and National Security Clause; 2) Commerce Clause; and 3) Taxing Power & Necessary and Proper Clause. However, after review of each clause, the District Court disagreed and found that Congress acted outside the scope of its constitutional authority.
What does this mean for the HOA industry? For now, not much. However, this decision will likely be appealed and eventually make its way to the United States Supreme Court. If the Supreme Court agrees that the CTA is not constitutional, associations (as well as other corporate entities) will be off the hook from having to comply with the registration requirements.
We will keep you updated as this situation develops.
Please contact an Altitude attorney, at 303.432.9999 or at [email protected] with questions about the CTA.