The Impact of Recent Legal Challenges on the Corporate Transparency Act

In a significant development that has introduced uncertainty across the business landscape, the Corporate Transparency Act (CTA) is at the heart of constitutional scrutiny. As part of BGM’s commitment to guiding businesses through the complexities of compliance with the Financial Crimes Enforcement Network (FinCEN) filings, we are closely monitoring the evolving situation following the March 1, 2024, court ruling in National Small Business United et al. v. Yellen et al. FinCEN announced that it will comply with the Court’s order for as long as it remains in effect and the government is not currently enforcing the CTA against the plaintiffs in the case.

What is the Corporate Transparency Act?

Introduced as a part of the 2021 National Defense Authorization Act, the CTA mandates that millions of closely held businesses in the United States disclose detailed information about their Beneficial Owners Information (“BOI”) to FinCEN. This requirement applies to the following:

  • all newly formed or registered entities in 2024 and afterward have 90 calendar days following the receipt of an actual or public notice that its creation or registration is effective to file their BOI with FinCEN.
  • all existing entities created or registered to do business before January 1, 2024, are required to comply by January 1, 2025, to file their BOI with FinCEN.

The CTA aims to enhance transparency in business operations, targeting entities such as corporations, limited liability companies, and other similar structures that may be used to conceal ownership and financial activities. The act is a significant step towards combating financial crimes, including money laundering and terrorism financing, by shedding light on the individuals who own or control these reporting companies.

What does this Court Case mean for you?

The ruling of the U.S. District Court in the Northern District of Alabama, declaring the CTA unconstitutional, casts a shadow over its future implementation. This ruling has placed the CTA in a precarious position, leaving businesses and their advisors in limbo. The court’s decision not only challenges the CTA’s constitutionality, but also opens the door to potential appeals and legislative amendments aimed at addressing the identified constitutional issues.

What should you do now?

Given this uncertainty, our advice to businesses and professional advisors is one of caution. Entities currently engaged in or considering CTA compliance efforts may need to reassess their strategies. At BGM, our team of advisors recommend the following:

  • For newly formed or registered entities in 2024 we are advising clients to follow the filing requirements.
  • For all existing entities created or registered to do business before January 1, 2024, we are recommending a pause in filing your BOI, which is January 1, 2025, until the government provides clearer direction.

During this period of uncertainty, businesses would be well-advised to conduct a thorough review of their governance documents and update them accordingly to ensure compliance with legal formalities for entity and trust management. This proactive stance not only positions businesses to adapt quickly to future developments regarding the CTA, but also strengthens their legal and operational integrity.

In conclusion, while the future of the CTA is ambiguous, readiness and compliance remain paramount. By staying informed and proactive, businesses can confidently navigate this period of uncertainty, and ensure they are well-positioned to adapt to any potential future challenges related to the CTA.

For personalized assistance and guidance through the complexities of the FinCEN BOI filing requirements or any other compliance concerns, please reach out to your BGM advisor. Our team of experts is dedicated to providing you with the most current and comprehensive support to ensure your business remains compliant, informed, and prepared for any changes in the regulatory landscape. Contact BGM today to navigate these uncertain times with confidence.

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