In a major reversal, the Fifth Circuit Court of Appeals has lifted a nationwide injunction against the Corporate Transparency Act (CTA), reinstating the requirement for businesses to file Beneficial Ownership Information (BOI) reports. This decision came just days before January 1, 2025, when the Financial Crimes Enforcement Network (FinCEN) initially imposed the compliance deadline.
The December 23, 2024, ruling stays a Texas court decision on December 3 that had paused the enforcement of the CTA nationwide. Businesses must now prepare to meet reporting requirements under updated deadlines announced by FinCEN.
What is the Corporate Transparency Act?
Enacted in 2021, the CTA is a federal law aimed at combating financial crimes like money laundering and tax evasion. The law requires most U.S. businesses and foreign entities registered to do business in the U.S. to report details about their beneficial owners – individuals who own or control at least 25% of the company.
The law applies broadly, with few exemptions, primarily targeting small and medium-sized businesses that were previously unregulated in this way.
What Does the Fifth Circuit Decision Mean for Businesses?
The court’s decision reinstates the CTA, emphasizing the public interest in preventing financial crimes. The appellate court ruled that the government is likely to succeed in defending the law’s constitutionality.
FinCEN has responded by providing updated deadlines for BOI reporting:
- Businesses Formed Before January 1, 2024: The initial BOI reporting deadline has been extended from January 1, 2025, to January 13, 2025.
- Businesses Formed Between September 4, 2024, and December 23, 2024: These entities have until January 13, 2025, to file their BOI reports, regardless of their original deadlines.
- Businesses Formed Between December 3, 2024, and December 23, 2024: These entities have 21 extra days from their original filing deadlines to submit their reports.
- Businesses Formed On or After January 1, 2025: The reporting deadline remains 30 days after the effective date of formation or registration.
Implications for Businesses
The CTA places substantial compliance responsibilities on affected businesses. Those unaware of the requirements until now must act quickly to meet these deadlines, particularly given the complexity of gathering and submitting ownership data.
While the Fifth Circuit’s decision settles immediate legal uncertainty, challenges to the CTA’s constitutionality continue. However, until further legal action changes the law’s status, businesses must comply or risk significant penalties.
SBEMP Attorneys’ Recommendations
Given the updated deadlines and the legal landscape, SBEMP Attorneys advises businesses to:
- Review Reporting Obligations: Determine whether your company is subject to the CTA and its BOI reporting requirements.
- Prepare Documentation: Gather and organize beneficial ownership information, including names, addresses, and identification details of all qualifying owners.
- File Reports Promptly: Avoid last-minute submissions to reduce risks of errors or noncompliance.
We encourage all affected businesses to act swiftly. Compliance with the CTA is critical, and we are here to help our clients navigate this complex process.
What’s Next?
The broader legal battle over the CTA continues, with several cases pending that could further shape its implementation. For now, businesses must prepare to meet the reinstated reporting requirements.
For assistance with compliance or more information on how this ruling impacts your business, contact me at [email protected].
