Q. I am on the board of directors of a condominium association. We are aware of last year’s federal government legislation called the Corporate Transparency Act, which imposes reporting requirements on corporate entities by Jan. 1, 2025, and was so broadly written that it unfortunately included condominium and community associations as well as co-ops. However, I recently read that a legal challenge to the act has resulted in it being held unconstitutional. Can you explain what is happening with the Corporate Transparency Act?
A. A recent federal court ruling has cast doubt over the future of the Corporate Transparency Act. The case, captioned National Small Business United, d/b/a National Small Business Association, et al. v. Janet Yellen, et al., Case No. 5:22-cv-01448-LCB (N.D. Ala.), was filed by the National Small Business Association, on behalf of its members. In the 53-page decision, a U.S. District Court in the Northern District of Alabama ruled that the act exceeds Congress’s authority and is thus unconstitutional.
The ruling is significant but does not spell the end of the Corporate Transparency Act altogether, at least not yet. First, the ruling is of limited applicability in that it only suspends enforcement of the act against the plaintiff in the case; it does not apply broadly to entities that were not a party to the case. Second, it appears likely that the ruling will be appealed and that additional challenges to the act will be filed. Third, it is possible that the Corporate Transparency Act will be amended by Congress to address the issues raised by the recent ruling.
Clarity regarding the fate of the act, including the need for condominium and community associations and co-ops to comply with its reporting requirements, is expected in the coming months ahead of the Jan. 1, 2025, reporting deadline. For now, the Corporate Transparency Act and its reporting requirements remain in effect (except for the plaintiff in the aforementioned case). As such, condominium, community association and co-op boards should (i) be aware of this development in the law; and (ii) barring any changes, continue to work with their accounting, management and legal professionals to prepare for the reporting deadline.
Q. I am a unit owner in a large condominium association. Our board holds executive sessions approximately every two weeks. What is a condominium board legally allowed to discuss in closed session board meetings and what type of minutes, if any, is the board required to keep?
A. On July 15, 2016, Gov. Bruce Rauner signed a bill that became Public Act 99-0567. The new law amended the Condominium Property and the Illinois Common Interest Community Association Act to allow board members of both condominium associations and common interest community associations to meet and discuss certain association business outside of open board meetings (i.e., closed session board meetings).
The amendment to the two statutes, which became effective on Jan. 1, 2017, greatly enhanced the ability of boards to work effectively and efficiently outside of the confines of a board meeting open to the unit owners. Board members may discuss the following topics in a closed session board meeting: (i) pending or probable litigation; (ii) third party contracts or information regarding appointment, employment, engagement or dismissal of any employee, independent contractor, agent or any other provider of goods and services; (iii) to interview any potential employee, independent contractor, agent or any other provider of goods and services; (iv) violations of rules and regulations of the association; (v) discussion of any association members’ unpaid share of common expenses; or (vi) consultation with the association’s legal counsel.
Per subsequent case law, Boucher v. 111 E. Chestnut Condominium Association, among several holdings, the Illinois Appellate Court held that condominium boards must keep minutes of closed session meetings including who was present and the legal basis/reason that allowed for the closed session board meeting. The discussions that occur in closed session are not required (or recommended) to be described in the closed session minutes.
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