Corporate Transparency Act Reinstated
Posted by [email protected] on Dec. 27, 2024 / Subscribe 0
Corporate Transparency Act Reinstated
by Trent Cotney
If you took Corporate Transparency Act (CTA) reporting off your end-of-the-year to-do list, you may need to add it back.
You may recall that on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a temporary injunction, which put reporting obligations on hold. However, just a few weeks later, on December 23, the U.S. Court of Appeals for the Fifth Circuit reinstated the immediate enforceability of the CTA. The Fifth Circuit’s three-judge panel, regarding the case Texas Top Cop Shop, Inc. v. Garland, stayed the lower court’s nationwide injunction. That means that companies required to file beneficial ownership reports to the U.S. Department of the Treasury must do so by January 1, 2025.
CTA Obligations
The CTA was enacted in 2021 as a strategy for enhancing financial transparency and preventing crimes such as money laundering and sanctions evasion. The law requires U.S. businesses of varying sizes to report information about their beneficial owners. These reports include personal details such as names, identification numbers, and addresses, and they are to be submitted to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
Requirements for Your Business
According to the CTA terms, most businesses incorporated or registered in a U.S. state must disclose information about their owners and other key stakeholders. This obligation impacts most small businesses, including limited liability partnerships (LLPs), limited liability limited partnerships (LLLPs), limited liability companies (LLCs), and business trusts. Single-member LLCs must report, but sole proprietors are exempt.
The requirements apply to U.S.-based and foreign companies:
- Domestic reporting businesses, such as corporations, LLPs, and other companies established through a state or tribal office
- Foreign reporting businesses, such as corporations, LLCs, and other companies formed under foreign laws and registered to operate in the United States
Reporting requirements include the following:
- Company name, physical address, trade name, registration jurisdiction, and tax identification number
- Beneficial owners’ names, birthdates, addresses, and identification numbers, along with copies of ID documents
- Names of those who filed the company formation documents or instructed others to do so
Exempt Companies
Specific large businesses in heavily regulated industries are not required to complete CTA reporting since they follow other transparency mandates. There are 23 exempt business categories, including entities such as Banks, Domestic Credit Unions, Bank Holding Companies, and Public Utilities. Large Operating Companies are also exempt and are defined as having the following:
- More than 20 full-time U.S.-based employees
- Physical offices located in the United States
- Annual revenue of more than $5 million, according to their latest tax returns
What We Can Expect Next
After the announcement, FinCen did provide a brief extension: Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
Although the reporting requirement is back in effect, it is hard to say what will transpire in the weeks ahead. Opposition to this case could request additional review from the Fifth Circuit, and other federal courts might challenge the ruling. Beyond that, the U.S. Supreme Court could get involved. Also, as Donald Trump enters the White House in January, he and the Republican-controlled Congress may not support the CTA obligations.
Current Advice
Given the most recent ruling, if your company is not exempt from the CTA reporting requirements, it is critical that you submit your beneficial owner information by the required deadline. The deadlines are based on when your company was created.
- For companies founded before January 1, 2024, the deadline is January 1, 2025.
- For companies founded between January 1, 2024, and January 1, 2025, you must submit the report within 90 days of formation.
- For companies founded after January 1, 2025, the deadline is 30 days after that formation.
For more information, visit the FinCEN web page, where you will find Frequently Asked Questions and instructional videos.
The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and NRCA General Counsel. You can reach him at [email protected] or 866.303.5868.
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