After the court vacated its first implementation order, pushing deadlines for compliance to January 13, 2025, for specific entities. As such, businesses are hereby advised to prepare for compliance with upcoming reporting requirements or face the consequences.
Corporate Transparency Act: Recent judicial developments have reinstated the Corporate Transparency Act, which seeks to enhance transparency through the obligation of firms to report their beneficial ownership information. This is a big boost for transparency in financial activities. A previously issued injunction that temporarily halted the CTA from taking effect was overturned by the Fifth Circuit Court of Appeals.
Earlier, the CTA had required existing businesses to file their beneficial ownership information with FinCEN on January 1, 2025. However, taking into account the court ruling, FinCEN recently released a short extension to its deadline, which was given to some entities until January 13, 2025. This would help provide businesses with more time to comply with the requirements of reporting.
The journey of the CTA has been full of legal battles and legislative disputes. Just a few weeks ago, a Texas district court judge granted a temporary injunction citing constitutional concerns. That was overturned by the appeals court that declared the law is constitutional. The Congress, which recently attempted to pass legislation to delay the CTA until 2026, was not successful in delaying the deadlines.
There have been divided reactions to the CTA’s reactivation. Those who are in favor claim that it will enhance national security through the limitation of the utilization of anonymous shell corporations and counter illegal financial activities. The others, however, fret over the compliance burden with possible penalties associated with reporting obligations. Interestingly, National Small Business Association members are still exempt from filing because of a previous court ruling that went in their favor, pending an appeal.
The deadline for January 13, 2025, draws near, and FinCEN continues to emphasize compliance and is working to alert the affected entities. Businesses are encouraged to get familiar with the reporting requirements so as to submit on time and accurately to avoid penalties.
