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The Corporate Transparency Act takes a hit but do you still have to file?

corporate transparency act

A recent court case has thrown a wrench into the implementation of the Corporate Transparency Act (CTA). On March 1, 2024, a federal district court in Alabama ruled that the CTA oversteps Congressional authority and blocked the Department of the Treasury and FinCEN from enforcing it against the plaintiffs in the case.


This is a significant development, but it's important to understand its limitations. The ruling only applies to the specific plaintiffs in the case, which include a small business owner, several reporting companies, a small business association, and its members (as of March 1, 2024).


What it Doesn't Mean

  • The CTA is Dead: The court's decision is likely to be appealed, and the legal process could take years. Businesses should not interpret this as a signal to disregard the CTA entirely.

  • Pre-2023 Businesses are Off the Hook: Importantly, the filing requirement for businesses formed before March 1, 2023, remains in effect. These entities are still required to report beneficial ownership information to FinCEN by the end of 2024.

  • New Businesses Can Wait? Not Likely: Entities formed in 2024 are legally obligated to file a report with FinCEN within 90 days of formation. While the Alabama decision creates some uncertainty, waiting for the outcome of the appeals process is a risky strategy. The appeals process could take years, and by that time, significant fines could accrue for non-compliance.


The Takeaway

The recent court ruling is a noteworthy development, but it's important to maintain a clear-eyed view of its implications. Businesses should continue to adhere to the CTA's reporting requirements unless they receive explicit guidance to the contrary. Consulting with a legal professional is always advisable in navigating complex legal matters such as this one.



 

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