The Corporate Transparency Act (CTA) is a federal law aimed at combating financial crimes like money laundering and tax evasion. Under the CTA, most corporations, limited liability companies (LLCs), and similar entities are required to disclose their “beneficial owners”—individuals who own or control at least 25% of the business or exercise significant decision-making authority.
On January 1, 2024, the CTA’s rules went into effect. Entities created before that date were given until January 1, 2025 to comply, while companies formed during 2024 were given 90 days to report the beneficial ownership information.
Several court actions were filed, challenging the new requirement. On December 3rd, 2024, Judge Amos Mazzant, a federal judge in Texas, issued a nationwide injunction. This injunction paused the reporting deadlines and prevents enforcement of the regulations. The ruling in Texas Top Cop Shop, Inc. v. Garland was in response to a request for a preliminary injunction, where the court found that the plaintiffs demonstrated a substantial likelihood of success on the merits of their claims. It was not a final determination of the case itself. The government may choose to appeal, although no statements have yet been made in response to the ruling.
Reporting Requirements:
While they have been placed on hold, and entities are not required to comply by a specific date, many businesses have already submitted the CTA information. Others may choose to do so in the future. To comply with the CTA, reporting entities will need to:
- Identify Beneficial Owners: Determine who qualifies as a beneficial owner within your company. Consider factors like ownership percentage and decision-making power.
- Collect Required Information: Gather key details about each beneficial owner, including their full legal name, date of birth, residential address, and an identification number (e.g., from a passport or driver’s license), as well as a scan or picture of that identifying document.
- Submit Information to FinCEN: File the information securely with the Financial Crimes Enforcement Network (FinCEN) through its online reporting system. Detailed instructions are available on the FinCEN website.
The above ruling was not the only successful challenge to the CTA. Earlier this year, a federal district court in Alabama ruled that the CTA was unconstitutional. Plaintiffs in that case were granted summary judgement, and CTA enforcement was suspended regarding the named plaintiffs and members of the National Small Business Association. Until the most recent ruling, for everyone else the requirement remained in effect.
What next:
If you are a business who has already submitted the beneficial ownership information, the regulations include an ongoing requirement to update the report if information changes. However, because of the injunction, those requirements are currently suspended. That does not mean that the ongoing requirement to update the report is removed completely! That requirement could be reinstated or changed based on further developments in this court case (or others), changes in the regulations or guidance or even further Congressional action. Because of that, it is important to stay aware of future developments.
If you are an entity who has not submitted the beneficial ownership information, your obligation to do so has been suspended. Again, this does not mean that the obligation is completely eliminated, just that as of this moment you are not required meet the previously-mentioned deadlines. You should keep up with future changes in this fluid situation, to avoid possible future liability. It might also be helpful to reach out to a legal or financial professional to discuss next steps. If the injunction is overturned on appeal, businesses may need to act quickly to meet reporting deadlines. Information on finding an attorney in your area is available here. Further, the FinCEN website provides additional resources and information to clarify requirements and streamline reporting.
For more information on the CTA and its requirements, the National Agricultural Law Center has a recorded webinar and factsheet available. Additionally, the Center for Agricultural Law and Taxation has followed the issue closely, and has resources, including a brief update on pending court challenges, available here. To be clear, these resources cover the CTA requirements, which have now been suspended due to the Texas Top Cop Shop ruling. Unless and until there are future changes with litigation or policy changes, regulated entities are not required to comply with the CTA reporting requirements.
Rumley, Elizabeth. “Corporate Transparency Act Deadline Upcoming.” Southern Ag Today 4(48.5). November 29, 2024. Permalink
