Corporate Transparency Act: Updates as of 12/30/2024

Background of the Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) is bipartisan legislation enacted in 2021 to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud.  Under the CTA, many existing and newly created companies must provide information to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) of the underlying beneficial ownership of the reporting companies (“BOI Reporting”).  Failure to timely file BOI reports could be subject to civil penalties starting at $500 per day and criminal penalties of up to $10,000 and/or two years in prison.

Current Status of the CTA

Congress has broad powers to enact laws, particularly in areas related to foreign affairs, interstate commerce and taxes.  The Senate passed the CTA by a veto-proof majority of 84 to 13 (i.e., 84% passage rate).  For many existing companies, the BOI Reporting deadline was set at January 1, 2025 (the “Reporting Deadline”).  Subsequent events have delayed the Reporting Deadline.  Here is a summary of recent developments.

  • December 3, 2024 – A federal court in Texas issued a nationwide preliminary injunction prohibiting the enforcement of the CTA.
  • December 11, 2024 – FinCEN requested the Fifth Circuit Court of Appeals issue a stay of the preliminary injunction with respect to the CTA.
  • December 20, 2024 – Congress considered, but ultimately did not include an extension of the Reporting Deadline as part of legislation to keep the federal government funded through March 14, 2025.
  • December 23, 2024 – A motions panel for the Fifth Circuit Court of Appeals issued a stay of the nationwide preliminary injunction. The Reporting Deadline of 1/1/2025 is once again in effect.
  • December 24, 2024 – FINCEN extends the Reporting Deadline from 1/1/2025 to 1/13/2025.
  • December 26, 2024 – A merits panel for the Fifth Circuit Court of Appeals vacates its motions panel’s previous stay of the nationwide preliminary injunction pending the outcome of the appeal.

Analysis

Absent Congressional action to repeal the CTA, it is more likely than not that the CTA will eventually be enforceable.  Congress has broad powers to enact laws.  The CTA is bipartisan legislation that was initially passed in the Senate by an 84% approval rate.  As recently as December 20, 2024, Congress elected not to repeal the CTA or further delay the CTA’s Reporting Deadline.  The information required for the BOI Reporting is information already possessed by governmental authorities for most taxpayers.  

Recommendation

Absent an undue reporting burden that can result from certain ownership structures applicable to a limited number of our clients, we generally recommend that clients proceed with BOI Reporting prior to the January 13, 2025, reporting deadline.

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