As the deadline for filing under the Corporate Transparency Act (CTA) approaches, many small businesses and organizations are raising questions about compliance. The CTA introduces a new regime requiring beneficial ownership information to be reported to the Financial Crimes Enforcement Network (FinCEN). This legislation impacts a wide array of entities, particularly small companies, LLCs, and corporations that need to file this information. Let’s break down the key elements of the CTA and its current status.

What Is the Corporate Transparency Act (CTA) and Why Does It Matter?

The Corporate Transparency Act mandates that corporations, limited liability companies (LLCs), and other business entities report their beneficial ownership information electronically to FinCEN. This move is aimed at increasing transparency to combat illicit activities, such as money laundering and tax evasion.

Entities formed before 2024 have until December 31, 2024 to file their reports, while entities formed in 2024 must file within 90 days after their formation. However, the CTA allows for several exemptions, primarily targeting smaller entities. For instance, large operating companies with over 20 full-time employees, more than $5 million in gross receipts, and a physical office in the United States are exempt. Exemptions also extend to public accounting firms, certain tax-exempt organizations, and other specified categories.

Legal Challenges to the CTA

In March 2024, a district court ruled the Corporate Transparency Act unconstitutional, arguing that the law exceeded Congress’s powers. The case was brought by National Small Business United, a nonprofit business league. The government swiftly appealed the ruling, and oral arguments took place on September 27, 2024, before the U.S. Court of Appeals for the 11th Circuit.

At the same time, litigation against the CTA is ongoing in other district courts across the country, reflecting the significant controversy surrounding the law’s implementation. Some lawmakers have proposed delaying the CTA’s filing deadline for a year, but no such extensions have been granted. With the year rapidly closing, FinCEN has yet to adjust its position, and businesses must remain prepared to meet the original deadlines.

Penalties for Noncompliance

The consequences for failing to file beneficial ownership information are severe. Businesses could face penalties of up to $591 per day for noncompliance, so it’s crucial to ensure that all required information is submitted on time.

Conclusion

As 2024 draws to a close, businesses that do not qualify for exemptions under the CTA must act quickly to meet their reporting obligations. The legal battle over the CTA’s constitutionality may still unfold, but for now, companies should remain vigilant and comply with current requirements. With hefty penalties at stake, ensuring that beneficial ownership information is submitted to FinCEN on time is essential for avoiding costly consequences.

If you have any questions or need assistance navigating the Corporate Transparency Act, feel free to reach out to our team for support.

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