The Corporate Transparency Act (CTA) has been a hot topic in 2024. This legislation, aimed at enhancing transparency in business ownership, requires nearly all entities created or registered to do business in the United States to report detailed beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
FinCEN, a division of the U.S. Department of the Treasury, seeks to curb money laundering and other criminal activities facilitated by opaque ownership structures and shell companies, especially by hostile or foreign adversaries.
With certain exceptions, the initial compliance deadline for beneficial ownership reporting for most entities formed or registered before January 1, 2024, was set for January 1, 2025. Entities created in 2024 were given a 90-day filing window, while those formed on or after January 1, 2025, were allowed only a 30-day filing period. Throughout 2024, legal and financial advisors worked diligently with clients to prepare for these reporting obligations, given the significant penalties for noncompliance. However, late 2024 brought unexpected legal developments, which disrupted the compliance timeline and created considerable uncertainty.
Timeline Of Key Events
For advisors navigating these changes with their clients, the
following timeline outlines significant recent events regarding the
CTA enforcement:
- December 3, 2024: The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, halting the enforcement of the CTA.
- December 5, 2024: The federal government filed an appeal with the U.S. Court of Appeals for the Fifth Circuit, seeking to stay (overturn) the preliminary injunction pending the appeal.
- December 23, 2024: A panel of the Fifth Circuit lifted the nationwide preliminary injunction, reinstating the CTA's reporting requirements. FinCEN responded by extending most filing deadlines, generally through January 13, 2025.
- December 26, 2024: The full Fifth Circuit vacated the stay, effectively reinstating the nationwide injunction against CTA enforcement.
- December 31, 2024: The U.S. Department of Justice filed an application with the U.S. Supreme Court, seeking to lift the nationwide injunction and allow enforcement of the CTA during the ongoing appeals process. As of January 3, 2025, the Supreme Court has not yet issued a decision regarding this application.
Current Status And Considerations
As of December 26, 2024, entities subject to the CTA are not
required to file Beneficial Ownership Information (BOI) reports.
For some clients, the uncertainty surrounding the CTA may have
prompted voluntary filings during the brief reinstatement period.
Others may have opted to wait, given the evolving legal landscape
and potential for further changes.
Whereas this article is up to date as of January 3, 2025, advisors should remain vigilant and keep clients informed as the situation continues to develop. Although the injunction against enforcement is currently in place, the future of the CTA remains uncertain. If the CTA is reinstated, entities may once again be required to comply with detailed reporting obligations.
Originally published by Financial Advisor
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
