Updated as of March 1, 2025
On March 1, 2025, the U.S. Department of the Treasury announced that it will no longer enforce the Corporate Transparency Act or the Beneficial Ownership Information reporting requirement under the regulation. Per the Treasury’s announcement, “it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines . . . it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.”
They went on to announce their intention to issue a proposed rule to narrow the scope of the rule to foreign reporting companies only. As always, we will update you when we receive more guidance on the rule applicable to foreign reporting companies, or any other developments that occur on this topic.
Read below for an overview of the CTA’s history in the courts.
For more information, please contact us at (216) 573-6000 to speak with a Gertsburg Licata attorney.
Previously Published as of 02/19/2025
This week, a U.S. district court lifted a nationwide injunction in Smith v. U.S. Department of the Treasury, reinstating the enforcement of the Corporate Transparency Act (CTA). Following the ruling, the Financial Crimes Enforcement Network (FinCEN) announced that the beneficial ownership reporting obligations are back in effect. FinCEN has set a compliance deadline of March 21, 2025, for:
- Companies formed before January 1, 2024, to submit their initial beneficial ownership information reports.
- Any company that needed to file an updated or corrected report during the period when the injunction was active.
This development is part of a series of legal decisions affecting the CTA’s enforcement. Given the evolving nature of these legal proceedings, FinCEN has indicated it will assess options for further deadline modifications during the 30-day extension period. Additionally, legislative efforts are underway, with the U.S. House of Representatives passing a bill to defer the reporting deadline for companies formed before January 1, 2024, to January 1, 2026; this legislation is currently pending in the Senate.
Companies not exempt from these reporting requirements should closely monitor these developments and ensure compliance with the current deadlines established by FinCEN.
For more information, please contact us at (216) 573-6000 to speak with a Gertsburg Licata attorney.
Previously Published as of 12/27/2024:
An order from the U.S. Court of Appeals for the Fifth Circuit reversed a ruling from earlier in the week granting a stay to the nationwide injunction. This latest decision has reinstated the U.S. district court ruling that the Corporate Transparency Act (CTA), which mandates filing a report disclosing personal stakeholder information to the Treasury Department, exceeds Congressional legal authority and is unconstitutional. This ruling means that, at least for the time being, businesses are not required to comply with the CTA’s reporting requirements as previously mandated.
As demonstrated over the last few days, this is a developing matter. We will continue to closely track changes to the CTA and its reporting requirements and will send updates as they happen.
Please contact us at [email protected] or call us at 216-573-6000.
Previously Published as of 12/24/2024:
On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit denied the request to continue the preliminary injunction from a Texas District Court that had temporarily halted enforcement of the CTA across the country while the appeal processed through the Court. This decision reinstates the CTA’s compliance requirements. Reporting entities must now prioritize submitting their beneficial ownership information to FinCEN’s database by the newly established deadlines to avoid significant penalties. In response to the Fifth Circuit’s ruling, the Financial Crimes Enforcement Network (FinCEN) issued updated guidance on filing deadlines for reporting companies:
- Entities in existence before January 1, 2024: Filing deadline extended to January 13, 2025.
- Entities with deadlines originally between December 3 and December 23, 2024: Deadline now January 13, 2025.
- Entities formed or registered between December 3 and December 23, 2024: Filing deadline extended by 21 days from the original due date.
- Entities granted disaster-related extensions: Deadline remains either the disaster extension date or January 13, 2025, whichever is later.
- Entities formed between December 24 and December 31, 2024: Reporting required within 90 days of formation.
- Entities created on or after January 1, 2025: Reporting must be completed within 30 days of formation, per FinCEN regulations.
Previously Published as of 3/4/2024
Update Regarding the Corporate Transparency Act
On March 1, 2024, a U.S. district court in Alabama ruled that the Corporate Transparency Act (CTA), which mandates filing a report disclosing personal stakeholder information to the Treasury Department, exceeds Congress’s legal authority and is unconstitutional. This ruling means that, at least for the time being, businesses are not required to comply with the CTA’s reporting requirements as previously mandated (see below).
However, it’s essential to understand that this decision could be subject to further legal challenges, including potential appeals. Thus, while the immediate effect of the ruling relieves businesses from the obligations under the CTA, the evolving legal landscape suggests that business owners should stay informed about any developments related to the CTA and its enforcement.
Business owners should also consider the implications of the ruling on their operations and compliance strategies. While they are not required to file under the CTA currently, it’s prudent to prepare for any future changes that could either reinstate these requirements or introduce new ones. We will continue to monitor pending actions and will provide timely updates regarding reporting obligations as required by the CTA.
Original Article Published October 2023:
New Corporate Transparency Act Reporting Requirement: What do I Need to File and When?
Starting January 1, 2024, millions of small businesses must file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement stems from the Corporate Transparency Act (CTA), aimed at combating money laundering, terrorism financing, tax fraud, and other illicit activities facilitated by concealing ownership of corporations, LLCs (Limited Liability Company), or similar entities in the United States. Congress asserts that collecting beneficial ownership information is essential to safeguard national interests and enhance efforts to counter these illegal acts.
Who Is Required To File A BOI Report?
“Domestic reporting companies” and “foreign reporting companies” are required to file a BOI report. A domestic reporting company includes those entities (such as corporations, limited liability companies, or other similarly organized entities) which were legally created by the filing of paperwork with a Secretary of State or similar office of authority. A foreign reporting company is any corporation or other entity formed under the laws of a foreign country and registered to do business in any U.S. state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office of authority. Unless any such entity is exempt, it is required to file the BOI report.
Who Is Exempt From BOI Reporting?
Most of the available exemptions from the pool of 23 exemption categories include entities already subject to significant federal or state regulation. Exempt entities include publicly traded companies, SEC-reporting entities, banks, credit unions, money services businesses, securities brokers and dealers, tax-exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, and accounting firms. Furthermore, a “large operating company” exemption applies to entities meeting specific criteria, such as having more than 20 full-time employees in the United States, a physical office presence in the country, and over $5 million in domestic annual gross receipts or sales based on a previous year U.S. federal income tax or information return.
What Information Must Be Reported?
Domestic reporting companies established before January 1, 2024, must report details about the company and its beneficial owners. Those companies established on or after that date must provide information about the company, its beneficial owners, and company applicants.
The report must include the reporting company’s full legal name, any other names, such as trade or “doing business as” names, the principal place of business street address and state, the jurisdiction where the company was formed, and its taxpayer identification number.
For all beneficial owners and applicants, the reporting company must report their full legal name, date(s) of birth, residential street address, unique identifying number, issuing jurisdiction documentation (U.S. passport, state or local ID document, driver’s license, or foreign passport), and an image of the document containing the unique identifying number.
When Are The Filing Deadlines?
For domestic reporting companies established prior to January 1, 2024, the initial BOI report must be submitted by January 1, 2025. Companies established on or after January 1, 2024, must file their initial BOI report within 30 calendar days from the date that their entity was legally formed (or, if previously exempt from BOI reporting, within 30 calendar days of the date when the entity no longer meets the criteria for an exemption).
If any information included in the BOI report changes, including changes in beneficial ownership and exemption eligibility, domestic reporting companies must update the information within 30 calendar days from when the change took place. Companies are not required to update company applicant information.
How Do We File?
All BOI reporting is accomplished through the FinCEN website. First-time BOI reports, amendments, and corrections all will be accomplished through electronic filing with no accompanying fees.
Individual beneficial owners and company applicants may request a unique FinCEN Identifier by applying to FinCEN.
How Can We Prepare For BOI Reporting?
- Small business owners and managers must first determine whether their business fits the definition of a domestic reporting company, therefore being subject to the CTA’s BOI reporting requirement.
- If so, they should next collect the required information for the initial BOI report and confirm the accuracy of such information.
- Companies should familiarize themselves with the BOI reporting information and process, found in more detail on FinCEN’s website.
- Companies should establish a system to track and update reported information, as necessary.
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. It does not establish an attorney-client relationship, and any reliance on the information contained herein is done at your own risk. For specific legal guidance tailored to your business and jurisdiction, it is recommended to consult with a qualified attorney who can provide professional advice based on your unique circumstances.
