Federal District Court for Massachusetts:
CTA Does NOT Apply to Unincorporated Condominium Associations in Massachusetts
The following is an excerpt from the ruling (for ease of reading, all citations have been removed, but are shown in the actual Order):
The CTA requires any “reporting company” to submit to the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the Treasury Department, a report containing the name, date of birth, address, and a copy of an identification document (such as a passport or state identification) of each of that company’s “beneficial owners.” A “beneficial owner” is “an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise—(i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.” A “reporting company,” in turn, is defined as a corporation, limited liability company, or other similar entity that is (i) created by the filing of a document with a secretary of state or similar office under the law of a State or Indian tribe; or (ii) formed under the law of a foreign country and registered to do business in the United States.
The crux of the matter was whether the CTA required unincorporated condominium associations such as Lewis Wharf Condominium Trust, a Massachusetts condominium located in Boston, to report beneficial ownership information to FinCEN. The CTA requires beneficial ownership information to be reported to FinCEN if an entity was created pursuant to a filing with a secretary of state or similar office.
Turning back to the Judge’s Order:
Plaintiff has not met its burden of showing that the future enforcement of the CTA is “certainly impending” or that there is a “substantial risk that the harm will occur.” In fact, both parties agree, accepting the facts in the complaint as true, that the CTA does not apply to Plaintiff. See, e.g., Doc. No. 13 at 8 (“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.”); Doc. No. 1 ¶ 24 (“[N]o condominium governing documents, including the declaration of trust, created under M.G.L. c.183A are filed with the Secretary of State’s office.”); Doc. No. 9 at 7 (“Plaintiffs have not alleged facts that would place their organization within the scope of the CTA’s reporting requirements.”). The Court sees no reason to question the parties’ reading of the applicability of the law.
(Emphasis added)
Fundamentally, the Order provides that the Lewis Wharf Condominium Trust, a Massachusetts condominium with the entity that manages the condominium being the Trust, is not a “reporting company” and therefore not subject to the CTA. The triggering event to be a “reporting company” comes from the “filing of a document with a secretary of state or similar office” which does not apply to Lewis Wharf Condominium Trust. The Court found, and in fact stated, that the parties agreed that the CTA does not apply to Lewis Wharf Condominium Trust given the manner in which that condominium entity – the organization of unit owners – was created as a condominium trust.
This federal court decision is good news for condominium associations in the Commonwealth of Massachusetts which are not incorporated – that is condominium associations created as condominium trusts or unincorporated association. The ruling also reinforces this office’s recommendation that condominium associations wait until late in year to file any beneficial ownership information with FinCEN, knowing that this case, among other efforts, were pending.
We must note that there remains the possibility that the case will be appealed in some capacity but such an appeal seems unlikely given how the Court noted this Order is consistent with the litigants’ position in the case. This office will monitor any future filings related to this case and will provide any further CTA-related updates to our clients as soon as we have them.
If you have questions about the ruling in this case, whether your association should be filing beneficial ownership information pursuant to the CTA, or whether your association may qualify as an incorporated association, please contact your counsel to discuss.
––By Erik Shaughnessy, Esq. and Ryan Severance, Esq.