Update: Corporate Transparency Act Preliminary Injunction Reinstated
Published: Dec. 30, 2024
The Corporate Transparency Act (CTA) merry-go-round continues! Following the Dec. 23, 2024 reinstatement of the CTA by the United States Court of Appeals for the Fifth Circuit, a separate Fifth Circuit panel reinstated the preliminary injunction on Dec. 26, 2024. As a result, the Department of Justice is enjoined from enforcing the CTA and businesses are not currently required to file. If you have not yet filed, but wish to, you may do so. No action is needed for those who have already filed. The litigation remains ongoing with oral arguments scheduled for March 25, 2025. A decision is likely in late 2025. These timeframes are subject to possible intervention by the United States Supreme Court.
Update: Corporate Transparency Act Reinstated
Published: Dec. 26, 2024
On Dec. 23, 2024, the United States Court of Appeals for the Fifth Circuit lifted the previously issued preliminary injunction on enforcement of the Corporate Transparency Act (CTA). As a result, the previously reported filing requirements have been restored. Fortunately, the Financial Crimes Enforcement Network within the Department of Treasury (FinCEN) has extended the filing deadline for businesses created or registered prior to Jan. 1, 2024 to Jan. 13, 2025. Businesses that are created or registered after Jan. 1, 2025 will still be required to file within 30 days. The litigation remains ongoing with an appeal to the full Fifth Circuit a possibility.
Update: Corporate Transparency Act Enforcement Suspended, at Least Temporarily
Published: Dec. 9, 2024
On Dec. 3, 2024, Judge Amos Mazzant III of the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the CTA. The United States government has filed an appeal and the matter is currently pending in the Fifth Circuit Court of Appeals. The timeline for the appeal is not yet clear, however, it is very likely that the matter will not be resolved by the Jan. 1, 2025 CTA filing deadline.
With the legality of the CTA in flux, business owners are left with uncertainty as to their obligations. There are a few options. First, you can proceed with filing as if there were no injunction in order to avoid any risk of penalty. Second, you can gather the necessary information in order to quickly complete your filing once the legal questions are resolved. If the legal questions are resolved after Jan. 1, 2025, as expected, it is highly probable that filing deadlines will be extended for a period of time, allowing you to complete the filing without the risk of penalty. Even if the deadline is not extended, prompt filing after January 1 is unlikely to result in fines and penalties as the government has indicated that their enforcement efforts will be largely focused on willful non-filers. If you have already filed, no action is necessary.
In his order, Judge Mazzant referred to the CTA as “likely unconstitutional,” so hopefully the filing requirement will quietly go away. As the legal process continues, we will keep you updated!
Original Post: Corporate Transparency Act and Your Obligations
Published Dec. 4, 2024
There is a good chance your business is subject to new regulations under the Corporate Transparency Act (CTA). The CTA, which went into effect on Jan. 1, 2024, is a new federal filing requirement that most domestic and foreign businesses must comply with. The CTA defines a domestic reporting company as any entity that is a corporation, limited liability company, or was created by filing a document with the secretary of state or any similar office under the law of the state or Indian tribe. While there are a number of exemptions, most apply to large business entities that are already required to provide similar information to other regulatory bodies. The purpose of the CTA is to prevent and combat illegal activity such as tax fraud, money laundering, and other financial crimes.
The CTA filing is relatively straightforward, requiring disclosure of a Beneficial Owner’s full legal name, date of birth, current residential address, and a unique number from an acceptable form of identification. Acceptable identification includes a passport, non-expired state, local or Tribal identification document, driver’s license or FinCEN identifier. Beneficial Owners are defined as any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25% of the ownership interests of such reporting company.
For existing entities, the filing is due by Jan. 1, 2025. Thereafter, any changes in beneficial ownership must be reported within 30 days of the change. Filings are made to the Financial Crimes Enforcement Network (FinCEN) and can be completed at www.fincen.gov/boi. This website will also help you determine if you are eligible for an exemption. Timely filing is imperative as there are per day financial non-compliance civil penalties in addition to criminal penalties for willful failure to file.
As you might expect, there are a number of legal questions as to the constitutionality of the CTA, along with implementation, enforcement, and data privacy concerns. In addition, with a new incoming administration well-known for its disdain for overregulation, a repeal or lax enforcement is feasible. Nevertheless, businesses should comply with all reporting requirements as currently required. In the meantime, we will be closely monitoring the CTA and report on any changes.
Thomas Clement
MRA Chief Operating Officer and General Counsel
