FEDERAL COURT AGREES WITH MEEB AND DEPARTMENT OF JUSTICE, CTA DOES NOT APPLY TO “ALL” CONDOMINIUM ASSOCIATIONS!
As previously reported, MEEB filed a pro bono legal action in Federal District Court against the U.S. Treasury Department and FinCEN seeking a declaration from the Court that the Corporate Transparency Act’s (“CTA”) beneficial interest filing requirements do not apply to unincorporated associations or condominium trusts. In response to the suit, the Department of Justice took the position that the case should be dismissed because the CTA’s filing requirements and enforcement mechanisms do not apply to condominium trusts in Massachusetts as MEEB set out in the Complaint. MEEB replied to this motion to dismiss seeking further confirmation from the Court that the CTA did not apply to the Lewis Wharf Condominium Trust, which was the lead plaintiff in this matter.
On November 22nd, Federal District Court Judge Sorokin agreed with the positions taken by both MEEB and the DOJ. Judge Sorokin found no reason to question the fact that both parties agreed that the CTA did not apply to Lewis Wharf because it was a condominium trust. While he affirmed MEEB’s position, Judge Sorokin ultimately dismissed the Complaint since the CTA did not apply to condominium trusts created in accordance with M.G.L. c. 183A and the threat of enforcement was purely speculative since the government had not taken any action to enforce the regulations. In essence, a condominium trust cannot maintain a cause of action challenging a federal law that does not apply to the trust.
As we’ve explained before in evaluating the need to file under the CTA, a domestic company is only required to report beneficial ownership information to FinCEN under the CTA if it is created by the filing of a document with a state secretary of state or similar office. The ambiguity suggested by some within the legal community as to whether a filing with the Secretary of State or “similar office” encompassed condominium trusts and unincorporated associations led MEEB to pursue this federal action. This ruling provides clearer guidance to MEEB as we continue to advise all forms of associations as to the CTA. The filing of a Declaration of Trust with the Registry of Deeds is recognized as a notice filing and is not required to create the entity. Based on our analysis of the regulation and the position taken by the government in this case it is our opinion that Massachusetts associations which are not incorporated or formed as condominium trusts, do not have to file under the CTA. This is why MEEB has consistently advised associations from the beginning to wait to file and why MEEB offered a way to comply for free through the MEEB website.
While there is litigation in other jurisdictions across the country concerning the CTA’s constitutionality, this is the first decision by the courts that acknowledges the CTA does not apply to certain forms of community associations. Read Decision here. MEEB will continue to provide your association with specific guidance as to whether filing in accordance with the CTA is required upon request. Join MEEB Attorneys Mark Einhorn, Seth Barnett, and Mathew Gaines as they continue the discussion regarding the CTA and this important decision on Thursday, December 5, 2024.