BREAKING NEWS – Corporate Transparency Act on Hold
as of Monday, March 3, 2024
On Friday March 1, 2024, the U.S. District Court for the District of Alabama declared the Corporate Transparency Act (CTA) unconstitutional. In the case of National Small Business Association v. Yellen (Case No. 5:22-cv-01448) [1], initiated by the National Small Business United, the challenge was against the CTA’s mandate for small businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
The ruling has the effect of suspending all BOI filing requirements for now, all enforcement actions, and all compliance concerns including questions of “practicing law without a license.” Experts believe the ruling will be appealed, probably to the Supreme Court, so this is a temporary filing requirement suspension until a final appeal is exhausted. Voluntary filing appears to still be allowed if for some reason a client desires to file.
Many Companies Must Report Ownership Data Starting Jan. 1, 2024
Beginning January 1, 2024, many companies that do business in the U.S. must report “beneficial ownership information” (BOI) to the Financial Crimes Enforcement Network (FinCEN). BOI consists of identifying information about individuals who own or exercise substantial control over the business entity, either directly or indirectly.
To meet this new reporting obligation, companies must complete and submit a new electronic form available on the FinCEN website (link below). Entities that must file the reporting form include many domestic and foreign corporations, LLCs and companies created by filing documents with a secretary of state or similar officer. However, 23 types of entities are exempt from the BOI reporting requirement, including many banks, credit unions and insurance companies.
A reporting company founded or registered before January 1, 2024 will have until January 1, 2025 to file its initial BOI report. Reporting companies established on or after January 1, 2024 must file within 30 days after the company’s creation or registration becomes official. Failure to file a BOI reporting form in a timely manner, or to update it when ownership information changes, may trigger significant civil or criminal penalties.
FinCEN website: https://www.fincen.gov/boi