In 2023, The US Department of the Treasury Financial Crimes Enforcement Network (FinCEN) introduced corporate reporting requirements that were planned to come into effect in 2024. However, there has been some turbulence relating to these requirements since then. We’re covering what’s happened and what your next steps are in this week’s post.
What’s The Corporate Transparency Act?
The Corporate Transparency Act (CTA) is the US beneficial ownership reporting law. Beneficial ownership reporting laws are rapidly being introduced around the world to shed light on who owns which companies. These laws are designed to reduce illegal tax evasion, as well as money laundering and the financing of terrorism.
You can read more about it in our earlier blog post.
Current Status of the Corporate Transparency Act Reporting Requirements
On December 23, 2024, the US Court of Appeals issued a stay pending appeal of a preliminary injunction in the matter of Texas Top Cop Shop, Inc., et al. V. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), which we’ll refer to as Texas Top Cop Shop Inc.
In Texas Top Cop Shop Inc., the US District Court for the Eastern District of Texas issued a nationwide preliminary injunction which effectively halted the beneficial ownership reporting requirements under the CTA. This happened on December 3, 2024.
So, the US Court of Appeals decision on December 23, 2024 reinstated the requirement for companies to report beneficial owners to the FinCEN.
At this time, FinCEN issued an alert that extended the deadline to file initial beneficial ownership information reports to January 13, 2025. The original deadline was January 1, 2025, so it is essentially a 12-day extension of the original requirements for certain companies. We won’t go into detail about the extension here given the current status of the CTA reporting, but you can read them for yourself in FinCEN’s alert.
Then, on December 26, 2024, the original stay was vacated by the US Court of Appeals for the Fifth Circuit. This decision again pauses the beneficial ownership reporting requirements under the CTA.
On December 27, 2024, FinCEN issued a new alert acknowledging the reinstatement of the preliminary injunction and that “reporting companies are not currently required to file beneficial ownership information with FinCEN.
Who Needs To Report Under The CTA
Again, while reporting requirements are currently paused, you may have reporting obligations if your company:
- Is a US corporation.
- Is a US LLC.
- Was created by filing a document with a secretary of state or similar office under state law or Indian tribal law.
There are more details about reporting criteria in our earlier post.
Next Steps For Business Leaders
While the reporting obligations under the CTA are currently paused, it’s possible we will see further changes following further court decisions.
With this in mind, it’s a good idea to prepare to report your beneficial owners to FinCEN since the timeline for reporting will likely be quite tight if the requirements are reinstated. It’s also worth mentioning that companies can voluntarily report at any time during the stay, if they so choose.
You can learn more about how to report here:
If you’re uncertain about your reporting requirements under FinCEN, reach out. Our corporate attorneys are available to assist.
Disclaimer
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