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Ruder Ware’s CTA compliance lawyers are closely monitoring the ongoing developments related to the Corporate Transparency Act. Here are the key updates we’ve noted:
On December 27, 2024, the U.S. Court of Appeals for the Fifth Circuit has once again vacated enforcement of the Corporate Transparency Act (CTA) and its reporting requirements.
On December 23, 2024 the Fifth Circuit Court of Appeals granted the U.S. Government’s motion for an emergency stay of the nationwide CTA injunction.
On December 5, 2024, the U.S. Government appealed the federal judge’s order temporarily blocking the enforcement of the Corporate Transparency Act (CTA).
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, temporarily suspending the enforcement of the Corporate Transparency Act (CTA).
What Should Businesses Do Now?
Stay Informed: Monitor updates on the CTA’s status, as future court decisions or legislative actions could alter current obligations.
Be Ready to Act: If the suspension is overturned, be ready to act swiftly in gathering beneficial ownership information to ensure compliance if reporting requirements are reinstated.
Consult Professionals: Engage with legal and compliance experts to understand how these developments impact your specific situation and to receive guidance on potential future requirements.
We are closely following this situation and will provide updates as more information becomes available.
For personalized advice, please contact our team at [email protected].
Entities are now required to report personal information to the federal government pursuant to the Corporate Transparency Act (the “CTA”).
To avoid civil and criminal penalties for noncompliance, over one hundred thousand entities have filed beneficial ownership information reports (“BOIR”) to the Financial Crimes Enforcement Network (“FinCEN”) as of April 1, 2024. Although this filing total is significant, many entities have not yet filed and are hearing about the CTA for the first time.
What is the Corporate Transparency Act?
Effective as of January 1, 2024, the CTA requires “beneficial owners” of “reporting companies” to disclose personal information to FinCEN. These disclosures are meant to combat financial crimes, money laundering, and terrorism financing by enhancing transparency in corporate ownership structures.
For reporting companies formed prior to January 1, 2024, the reporting company has until the end of the year to file its BOIR. For reporting companies formed on or after January 1, 2024, the reporting company has 90 days from its formation to file its BOIR. Starting in 2025, this 90-day filing window will be reduced to 30 days.
Is my entity a “Reporting Company”?
As a general rule, if your entity was formed by filing a document with a government office, it is a “reporting company” and must comply with the CTA requirements. There are, however, exemptions to this general rule. For instance, banks, credit unions, insurance companies, and certain types of tax-exempt entities likely qualify for an exemption. Additionally, a large operating company is exempt if the entity has over 20 full-time employees and over $5 million in gross receipts or sales.
There are 23 total exemptions for which a reporting company may qualify. If no exemption applies, then your entity must report personal information about each of the entity’s beneficial owners, as defined by the CTA.
What is a Beneficial Ownership Information Report and who are beneficial owners?
A BOIR discloses personal information about the “beneficial owners” of your entity. This defined term is slightly misleading in that a beneficial owner does not need to be an owner of the entity. Instead, a “beneficial owner” is any individual who, directly or indirectly, (1) exercises substantial control over a reporting company or (2) owns or controls at least 25 percent of the ownership interests of the reporting company. Despite the clarity of the second prong, analyzing “substantial control” under the first prong can be challenging given the novelty of the CTA. This, however, may become clearer as more extensive guidance emerges.
What personal information must I disclose?
A beneficial owner is required to disclose several pieces of personal information to FinCEN. Specifically, the required disclosures include the beneficial owner’s first and last name, residential address, and a photo of either their driver’s license or U.S. passport.
In addition to the beneficial owner’s disclosures, the reporting company must disclose information such as its legal name, tax identification number, jurisdiction of formation, and principal address.
Is the Corporate Transparency Act here to stay?
The constitutionality of the CTA has been questioned in the legal field. Nevertheless, as of this writing, the CTA remains a binding law with which reporting companies must comply.
We will continue to monitor filings and rulings with respect to the constitutionality of the CTA and provide updates as they become available.
What resources are there to assist me with compliance?
If you have any questions related to the CTA, please contact Ruder Ware at [email protected]. Our corporate transaction attorneys are happy to assist you with analyzing your entity’s CTA requirements.
If you’re interested in receiving updates on CTA, you can subscribe here.
The Corporate Transparency Act (“CTA”) has been on a journey this past month with a whirlwind of court rulings: halted by a federal district court, reinstated by the Fifth Circuit’s motions panel, had its reporting deadlines extended by FinCEN, and then halted again by the Fifth Circuit’s merits panel. Amidst all this back-and-forth, predicting what […]
The U.S. Court of Appeals for the Fifth Circuit has once again vacated enforcement of the Corporate Transparency Act (CTA) and its reporting requirements. This latest decision temporarily halts the mandate for entities to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), reinstating a pause on compliance obligations. The appellate court’s panel […]
FinCEN has extended the reporting deadline for companies created or registered before January 1, 2024, to January 13, 2025. In an alert posted Tuesday night, FinCEN recognized that “reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect.” Previously, the reporting deadline for these companies was […]
The Corporate Transparency Act (“CTA”) and its reporting requirements are back in effect. The Fifth Circuit Court of Appeals has granted the U.S. Government’s motion for an emergency stay of the nationwide CTA injunction. This means the federal injunction that sought to overrule or pause the CTA is temporarily halted. As a result, reporting companies […]
The U.S. Government has appealed a federal judge’s order temporarily blocking the enforcement of the Corporate Transparency Act (CTA). As a result, the case is now headed to the Fifth Circuit Court of Appeals. Currently, reporting companies are not required to submit filings. FINCEN has acknowledged this in a recent update to its website, stating: […]
A federal district court in Texas has issued a landmark decision postponing the enforcement of the Corporate Transparency Act (the “CTA”). The Court held that the CTA exceeds Congress’ power and is therefore likely unconstitutional. As a result, reporting companies are no longer required to comply with the CTA’s January 1, 2025, reporting deadline. As […]
The Corporate Transparency Act (CTA) remains in effect, and, as a result, many entities are required to submit filings to the federal government by the January 1, 2025, deadline. A failure to timely file may result in civil and criminal penalties. Under the CTA, a “reporting company” must file a Beneficial Ownership Information Report (“BOIR”) […]
The Corporate Transparency Act (the “CTA”) imposes requirements on entities dissolved in 2024. Effective as of January 1, 2024, the CTA mandates entities disclose information about their “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”). Previously, there was uncertainty about whether dissolved entities must report under the CTA. However, on July 8, FinCEN updated […]
Wisconsin’s marital property laws impact compliance with the Corporate Transparency Act (the “CTA”). As discussed in other Ruder Ware CTA Focus Team insights, the CTA requires a “reporting company” to report information about its “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”). The CTA defines a beneficial owner as “any individual who, directly or […]
The Corporate Transparency Act (the “CTA”), part of the federal government’s effort to curtail money laundering by means of shell company structures, imposes disclosure requirements on most entities registered to do business in the United States. As discussed in other Ruder Ware CTA Focus Team insights, there is a presumption that all entities are bound […]
