By: Tom Scriven and Zahra Charles
New York, New York – The Corporate Transparency Act (the “CTA”), which went into effect on January 1, 2024, imposes disclosure and reporting obligations on certain companies that are formed or registered to do business in the US. Under the CTA, certain companies are required to file corporate transparency reports with beneficial ownership information (“BOI reports”) with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA has faced legal challenges since it came into effect.
As we announced in a client alert published earlier this month, on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that barred the federal government from enforcing the CTA. In Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al., six plaintiffs, including the National Federation of Independent Business, which counts 300,000 companies as members, and several other small businesses, filed a lawsuit arguing that Congress overstepped its constitutional authority in passing the CTA. The Texas Court determined that the plaintiffs were likely to succeed in their claims and issued a nationwide injunction.
On December 23, 2024, the U.S. Court of Appeals of the Fifth Circuit lifted the December 3rd injunction that had barred the federal government from enforcing the CTA. The Court of Appeals stated that the U.S. Department of Justice “made a strong showing that it is likely to succeed on the merits in defending the CTA’s constitutionality” under the U.S. Constitution’s Commerce Clause, which allows Congress to regulate economic activity. As enforcement resumes, reporting companies are once again required to file BOI reports, unless eligible for an exemption.
FinCen understands that reporting companies may need additional time to comply given the previous preliminary injunction and accordingly has extended BOI report filing deadlines, as described below:
- Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN. These companies would otherwise have been required to report by January 1, 2025.
- Reporting companies created or registered in the United States on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, now have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
- Reporting companies that are created or registered in the United States on or after January 1, 2025, have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.
In light of the reinforcement of the CTA, we encourage reporting companies to meet the updated filing deadlines to avoid civil and criminal penalties. These penalties may include fees of up to $500 per day, or imprisonment for up to two years, for willful failure to file or providing false or fraudulent information.
RPCK is continuing to monitor developments regarding the CTA. As always, RPCK lawyers are available to assist with any questions that you may have.