The CTA, which took effect on January 1, 2024, requires certain privately held entities to report specified information about their beneficial owners to the federal government’s Financial Crimes Enforcement Network (FinCEN). The principal purpose of the CTA is to facilitate enforcement of laws intended to prevent money laundering and financing of terrorist activities by identifying those engaged in such activities.
On December 3, 2024, a Texas federal court preliminarily blocked the Corporate Transparency Act (“CTA”) and its implementing regulations. The order states that companies nationwide do not need to comply with the January 1, 2025, deadline to report their beneficial owners to the Financial Crimes Enforcement Network.
The judge determined that the CTA and its implementing rules are “likely” unconstitutional for purposes of a preliminary injunction. The court did not make an affirmative finding that the CTA and its implementing rules are contrary to law, or that they amount to a violation of the Constitution.
The decision will almost certainly be appealed, and enforcement could resume if the court’s order is overturned. Adding to the uncertainty, the incoming Trump administration could take several steps to limit or halt the enforcement of the CTA administratively, including working with Congress to repeal or amend the CTA. This would require legislative action, which may depend on the composition of Congress.
Recommended Steps For Businesses
Businesses should evaluate their next steps regarding compliance with the CTA in view of how far along they are in the compliance process.
Businesses That Have Filed With FinCEN: No immediate action is required at this stage. We recommend that these businesses stay updated on litigation outcomes and any policy shifts under the next administration.
Businesses That Have Obtained FinCEN Identifiers For Each Of Their Beneficial Owners But Have Not Filed With FinCEN: If the injunction is overturned on appeal, businesses may need to act quickly to meet the new reporting deadline. If all Beneficial Ownership Information has already been reported to FinCEN to obtain the FinCEN Identifiers, there is no apparent drawback to proceeding with the filing.
Businesses That Have Not Obtained FinCEN Identifiers For Each Of Their Beneficial Owners And Have Not Filed With FinCEN: Delayed filing may be beneficial as no business is currently required to comply with the CTA. However, since the CTA’s enforceability could be reinstated, having compliance mechanisms in place will help mitigate risks.
For more information on the CTA and the BOI Reporting Requirements, please click here for our previous alert.
We will continue to monitor developments regarding the CTA.
For further information, contact:
Barry A. Cassell
bcassell@golenbock.com
(212) 907-7337
Jacob L. Chase
jchase@golenbock.com
(212) 907-7362
Sarah E. Kaehler
skaehler@golenbock.com
(212) 907-5680
Maureen R. Monaghan
mmonaghan@golenbock.com
(212) 907-7335
May Shim
mshim@golenbock.com
(212) 622-7161
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