The Corporate Transparency Act (CTA) has been a hot topic ever since it took effect a year ago on January 1, 2024. The CTA mandates that most smaller corporations and limited liability companies (LLCs) file a beneficial ownership information (BOI) report with the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN). These reports identify and provide contact information for the human beings who own or control these entities and are used by law enforcement to combat illegal activities like money laundering and drug trafficking.

However, the implementation of the CTA has been anything but smooth. Let’s dive into the background and current status of this significant regulation.

The Rocky Road of the CTA

Initially, the deadline for filing BOI reports for businesses in existence before 2024 was January 1, 2025. Businesses formed during 2024 had a 90-day window post-formation to file. As of early December 2024, only about 9 million out of an estimated 32.6 million businesses had filed their BOI reports.

Legal Challenges and Court Rulings

On December 3, 2024, a Texas federal district court ruled that businesses that did not file their BOI reports during the court’s injunction could not be penalized by FinCEN. This ruling indefinitely delayed the January 1, 2025, deadline.

However, the legal landscape changed quickly:

• On December 23, 2024, the Fifth Circuit Court of Appeals overturned the Texas injunction, reinstating the BOI filing requirements.
• On the same day, FinCEN extended the deadline to January 13, 2025.
• Just a few days later, on December 26, 2024, the Fifth Circuit vacated its stay, reinstating the Texas court’s injunction, making penalties non-applicable for not filing BOI reports during the injunction period.

Current Status of BOI Filing Requirements

As of now, businesses are not required to file beneficial ownership information with FinCEN and are not subject to penalties for not filing while the injunction is in effect. This applies to:

• Existing businesses as of January 1, 2024.
• New reporting companies formed in 2024.
• Companies with reportable changes requiring a revised report.
• Reporting companies that will be formed in 2025.

FinCEN has stated that while filings are not required, businesses can file voluntarily to avoid uncertainty.

Future of the CTA

The Texas case is just one of 13 lawsuits challenging the CTA. Courts are divided on its constitutionality, and the issue may ultimately be decided by the U.S. Supreme Court. Additionally, new legislative efforts could further impact the CTA, including calls to extend filing deadlines and even efforts to repeal the law.

What Businesses Should Do Now

• If you’ve already filed your BOI report: No further action is needed unless there’s a change that requires updating your report.
• If you haven’t filed: You can choose to file voluntarily now or wait until there’s more clarity. Keep in mind that if the injunction is lifted, you may have a short window to file your report, so it’s wise to gather the necessary information in advance.
• Stay informed: Monitor the latest developments to ensure compliance if the courts require filing.

Takeaways

The CTA requires most smaller corporations and LLCs to file a BOI report with FinCEN, but the current injunction means you face no penalties for not filing by the original January 1, 2025, deadline. While the injunction is in place, you can still file voluntarily.

This post serves solely for informational purposes and should not be construed as legal, business, or tax advice. Individuals should seek guidance from their attorney, business advisor, or tax advisor regarding the matters discussed herein. Provident CPAs assumes no responsibility for actions taken based on the information provided in this post.