A law that was meant to catch criminals hiding behind corporate structures may instead impact your neighbor who just wants to tweak the pool schedule.
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According to an amicus brief filed with the U.S. Supreme Court by the Community Associations Institute (CAI), a federal anti-money laundering law called the Corporate Transparency Act (CTA) is being improperly applied to nonprofit homeowners and condominium associations. CAI argues that the law creates “unnecessary administrative burdens and discourage[s] homeowners from volunteering to serve their communities.”
Dawn Bauman
“Nearly 1 in 4 Americans live in over 373,000 community associations nationwide. These are locally governed nonprofit organizations run by volunteer homeowner board members that help maintain roads, stormwater systems, landscaping, pools, lighting and other shared infrastructure and municipal-like services residents rely on every day,” CAI CEO Dawn M. Bauman said. “CAI believes Congress never intended for volunteer-led community associations to be treated the same as anonymous shell companies engaged in money laundering and other illicit financial activity.”
Bauman said that the CTA was passed in 2021, and shortly thereafter, CAI recognized that nonprofit community associations were being inadvertently swept up into its enforcement “despite posing low risk for illicit financial activity.”
The membership organization subsequently appealed to members of Congress and their staffs to explore exemptions, submitted an official request to the Treasury Department for an exemption and, ultimately, filed the amicus brief to argue that community associations fall outside of the intended scope of the law.
Application of the law would require volunteer board members to submit personal identifying information to the Financial Crimes Enforcement Network, including names, addresses, dates of birth and driver’s license or passport information, plus uploaded identification documentation. Failure to comply could result in associations and board members being hit with civil and potential criminal penalties of up to $10,000 and two years in prison.
“Community association boards regularly experience turnover as homeowners rotate on and off boards through elections, resignations or relocations,” Bauman said. “That creates a unique challenge under the CTA because, unlike traditional corporations with paid executives, compliance departments, or in-house legal teams, community associations are nonprofit organizations largely run by volunteer homeowners. Frequent board turnover could require continual updates to beneficial ownership filings and place ongoing compliance responsibilities on volunteers with no commercial or compliance function.”
Bauman said the CAI is also concerned the law might discourage volunteers from serving on HOA and condo boards due to privacy concerns and potential civil and criminal penalties.
While Bauman said her organization has not conducted a formal cost study, CAI estimates compliance could result in “hundreds to thousands of dollars annually in additional legal, administrative, and management costs tied to attorney review, filing updates, and ongoing compliance obligations.”
In addition, CAI points to privacy concerns “related to invasive personal disclosures, who may access the data, under what circumstances it could be shared, and whether sufficient privacy protections exist for volunteer board members.”
According to a 2024 snap survey of 951 community associations by The Foundation for Community Association Research, 81 percent of members surveyed believe that the CTA’s reporting requirements might make it harder to get community members to volunteer, and 72 percent believe the requirements may increase turnover and lead board members to resign.
