Update: A gift from the courts- the Corporate Transparency Act enjoined
Update posted Dec. 23:
– A federal appeals court on Monday, Dec. 23, lifted an order blocking the nationwide enforcement of the Corporate Transparency Act, an anti-money laundering law that requires corporate entities to file “Beneficial Ownership Information” (BOI) with the U.S. Treasury Department.
A three-judge panel of the New Orleans-based 5th U.S. Circuit Court of Appeals stayed a nationwide injunction issued earlier this month by a federal judge in Texas who had concluded that the Corporate Transparency Act was unconstitutional.
This now means the Jan. 1, 2025 deadline to tile the BOI reports for reporting businesses will be enforced.
Note: This is not legal advice to you individually, and you should rely on your own family law and estate planning attorneys to advise you.
Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.” You can reach her at Teresa@trlawgroup.net.
Original article posted Dec. 18:
Local attorney Teresa J. Rhyne.
By Teresa J. Rhyne, Esq.
– I recently wrote that your business was running out of time to file your Beneficial Ownership Information (“BOI”) reports with the Financial Crimes Enforcement Network (a unit of the U.S. Department of the Treasury, known as “FinCEN”). But thanks to a recent court ruling, that’s no longer the case. Your business does not have to file the BOI with FinCEN. Not yet anyway.
What happened?
On January 1, 2024, The Corporate Transparency Act (CTA), a new federal law, came into effect, which required over 30 million small and medium-sized businesses to report ownership information to the federal government by January 1, 2025. Failure to timely file the report could result in fines of at least $500 per day, up to $10,000 maximum, and two years’ jail time.
Despite the bill that created CTA being bi-partisan, and despite its admirable goal to eliminate anonymity in business ownership in order to prevent money laundering and terrorist activities, some folks were outraged. Lawsuits ensued, and two of note resulted in judgements declaring CTA unconstitutional.
The Alabama case
In March of this year there was an Alabama court case that declared the law unconstitutional. However, FinCEN was quick to appeal and issued a notice that they would continue to implement and enforce the Corporate Transparency Act, except as to the specific plaintiffs in the Alabama court case. So, except for that relatively small group of plaintiffs, businesses were still required to file the BOI statements by year-end.
The Texas case
On Dec. 3, 2024, a Federal District Court in the Eastern District of Texas issued a nationwide preliminary injunction temporarily blocking enforcement of the Corporate Transparency Act (CTA) and its reporting rule, on the basis that it is an unconstitutional overreach by Congress.
FinCEN responded, “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” Not unexpectedly, on Dec. 5, 2024, FinCEN also filed an appeal of the Texas District Court Ruling.
The latest
Despite FinCEN’s “we won’t enforce” statement, the Department of Justice filed an emergency motion with the U.S. Court of Appeals for the Fifth Circuit on Dec. 13, 2024, to stay the Texas preliminary injunction pending appeal. The government has asked for a ruling by Dec. 27, 2024. The Fifth Circuit, of its own accord, accelerated the briefing schedule and the final responses are due to the court by Dec. 19.
It’s likely that the Fifth Circuit will issue a ruling before the end of the year. Such a stay, if granted this month, could result in reporting entities being required to file their BOI report on short notice by the January 1, 2025, deadline. Alternatively, FinCEN could adjust the January 1, 2025, deadline to give reporting entities additional time to comply with their BOI reporting obligations.
Fun, huh?
Adding to the fun, the change in administration may bring about a change in the government’s view of the Corporate Transparency Act. It is unknown whether President-elect Trump’s administration would pursue the appeals. If the government abandons its appeals (in the Alabama and Texas cases), CTA dies altogether and it’s back to Congress to fashion a new law.
What now?
Businesses that would have been required to file Beneficial Ownership Information reports now have, in essence, three options:
1. Do nothing/ don’t file – Wait until the court battles are over and there is a definitive rule. You may save yourself some time and unnecessary gathering of personal information if CTA is ultimately declared unconstitutional. You may also be scurrying to comply at the last minute if the injunction is stayed.
2. Get ready to file – Get all information together and be ready to file quickly, but don’t file until either the stay is granted, or the litigation ends, and either the law is declared unconstitutional or FinCEN requires the filing in the same manner or in some modified form. If it’s a short deadline, you’ll be ready to go.
3. Go ahead and file the BOI – You’ll get it over with, won’t be faced with a short deadline, and it’s information the government has anyway (just not perhaps in connection with the name of your business entity).
There is no easy answer here. So maybe this isn’t such a gift after all?
Note: This is not legal advice to you individually, and you should rely on your own family law and estate planning attorneys to advise you.
Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.” You can reach her at Teresa@trlawgroup.net.
