On December 23, 2024, the Fifth Circuit Court of Appeals lifted a nationwide injunction that had temporarily blocked the enforcement of the Corporate Transparency Act (CTA). This pivotal decision allows the reporting requirements under the CTA to move forward, signaling a major development for entities required to comply.
What This Means for Businesses
The Corporate Transparency Act, enacted to combat financial crimes such as money laundering and terrorist financing, mandates that certain corporations, limited liability companies (LLCs), and other entities report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Compliance with the CTA helps identify the individuals who own or control these entities.
With the injunction lifted, entities subject to the CTA’s requirements must now prepare to submit their beneficial ownership information to FinCEN by January 13, 2025. This extended deadline provides additional time for businesses formed before 2024 to meet their obligations.
The Legal Battle Leading to the Decision
Earlier this month, a federal judge in Texas issued a nationwide injunction, halting the enforcement of the CTA over concerns about its constitutionality and potential burden on small businesses. In response, the U.S. Treasury Department appealed, and the Fifth Circuit’s decision to reverse the injunction means enforcement of the CTA’s provisions is back on track.
Next Steps for Businesses
Compliance with the CTA is critical, as non-compliance can result in severe penalties, including fines of up to $10,000. Businesses should take the following steps to ensure they are prepared:
- Assess Applicability: Determine if your entity is required to comply with the CTA’s reporting requirements.
- Gather Information: Identify and document the beneficial ownership details necessary for reporting.
- Submit on Time: Ensure all required information is submitted to FinCEN by the January 13, 2025, deadline.
Why It Matters
The CTA is a significant measure in the federal government’s efforts to increase transparency in corporate ownership and combat illicit financial activities. Its enforcement underscores the need for businesses to maintain accurate records of ownership and control.
If you have questions about the CTA or need assistance preparing your beneficial ownership report, the experienced attorneys at DBL Law, including Bob Hoffer, are here to help. Contact us today to ensure your compliance.
