Corporate Transparency Act (CTA) Are you in compliance?

By: David K. Olive

FEBRUARY 18, 2025 UPDATE:

On February 18, 2025, the U.S. District Court for the Eastern District of Texas granted FinCEN a stay order on its previously issued preliminary nationwide injunction on the enforcement of the Corporate Transparency Act (CTA). As a result, BOI reporting requirements are now mandatory.

DECEMBER 23, 2024 UPDATE:

An appellate court today ruled in favor of the federal government in reversing a nationwide injunction against the Corporate Transparency Act. The decision means that the CTA’s reporting requirements are now back in full effect, giving the approximately 20 million entities who have not yet submitted their filings just a few days to do so.

DECEMBER 3, 2024 UPDATE:

On December 3, 2024, a federal court in Texas issued a nationwide preliminary injunction that temporarily halts the enforcement of the Corporate Transparency Act (“CTA”) across the entire country.  The CTA, which went into effect at the beginning of this year, mandated that approximately 32.5 million businesses in the U.S. disclose detailed information about their Beneficial Owners to the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. This requirement was aimed at enhancing transparency and curbing illicit activities, but it raised significant privacy and operational concerns among businesses.

The Court’s order is a preliminary injunction only and not a final decision on the merits.   The Court’s order temporarily pauses enforcement of the CTA on a nationwide basis, but enforcement could resume if the Court’s order is overturned on appeal or the Government ultimately prevails on the merits.

This preliminary injunction means that, for now, the rules requiring reporting companies to file BOI reports is temporarily on hold.  However, it is expected that the federal government may seek an expedited appeal of this decision and request a stay of the preliminary injunction.  A stay or reversal from an expedited appeal would reinstate the FinCEN reporting obligations, and an extension cannot be expected or relied on.  As the ultimate outcome of this decision is currently uncertain, Reporting Companies that have not filed to date would be well advised to continue to gather the requisite information for filing and be prepared to file in anticipation of an appeals court reinstating the Beneficial Ownership Information (BOI) Reporting Rule.

Make sure you’re on track! Assess your compliance status today and take the necessary steps to ensure you’re meeting all regulations. Don’t wait—secure your peace of mind now!

CTA Overview:

• Enacted: January 2021
• Purpose: Requires certain entities (e.g., corporations and limited liability companies) to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

Beneficial Ownership Reporting Requirements:

• Information to Report:
  • Full legal name
  • Date of birth
  • Current residential or business address
  • Unique identifying number from an acceptable identification document (e.g., passport, driver’s license)
• Definition of Beneficial Owner:
  • Anyone with a 25% ownership interest in the company
  • Any individual exercising “substantial control” over the company

Reporting Deadlines:

• New Entities: Must submit information to FinCEN at the time of entity formation.
• Existing Entities (before January 1, 2024): Must comply by the end of this calendar year.

Penalties for Noncompliance:

• Civil and Criminal Penalties: Potentially severe consequences for failing to meet reporting requirements.

Key Takeaway for Clients:

• Ensure compliance with CTA reporting requirements.
• Stay informed about developments to effectively navigate the evolving regulatory landscape.