Update on the Corporate Transparency Act

The Corporate Transparency Act of 2019 (“CTA”) is a law that went into effect on January 1, 2021, to help the U.S. government track and fight money-laundering, terrorism and other financial crimes. Under this act, many companies in the U.S. must file a report that provides contact information for the company’s “beneficial owner(s)” to FinCEN, a bureau of the U.S. Treasury Department. Beneficial owners are people who own at least 25% of the company or exercise control.

The filing deadline to file Beneficial Ownership Information reports ("BOI reports") for existing businesses is January 1, 2024. Any business formed in 2024 has 90 days from the date of formation to file its BOI report.

In early December, however, a federal district court in Texas filed a nationwide preliminary injunction (stop everything order) against the Corporate Transparency Act.  The plaintiffs in that suit argued that the law is unconstitutional. The judge determined that allowing beneficial owner information filings to continue while the constitutionality of the law is determined would cause "irreparable harm" to the business owners and halted enforcement of the law until the case is heard.

Other federal courts have ruled in similar suits that the law is indeed constitutional and enforceable.  No injunctions were issued in those cases.

Currently, beneficial ownership information reporting requirements are not being enforced, and the Department of Treasury is appealing the Texas order.  

It is unclear what is going to happen. 

BOI reporting is currently optional.  Some business owners are filing now so that they don't have to monitor the court case or think about it later. Others are taking a "wait and be ready" approach.