For our past analyses and updates on the CTA, please visit our blog.

As a quick summary, the Corporate Transparency Act (CTA) requires most corporations, limited liability companies and similar entities formed or registered to do business in the United States to report beneficial ownership information (BOI) reports to the U.S. Treasury’s FinCEN division. Reporting companies formed prior to January 1, 2024, have the remainder of 2024 to file, those formed during 2024 have 90 days to file after formation, and those formed on or after January 1, 2025, have 30 days to file.

A “beneficial owner” is any individual who, directly or indirectly:

1) Exercises substantial control over a reporting company, OR

2) Owns or controls at least 25 percent of the ownership interests of a reporting company.

There are various exemptions from reporting allowed, but failure to file BOI reports may result in penalties of $500 per day up to $10,000.

Recent Judicial and Congressional Action Muddy the Waters

On March 1, 2024, a federal judge in the U.S. District Court for the Northern District of Alabama held the CTA unconstitutional and prevented FinCEN from enforcing the CTA against only the specific plaintiffs in the case limited to (members of the National Small Business Association (NSBA) and possibly companies in the Northern District of Alabama.

It is expected that the Treasury will appeal this decision to the Eleventh Circuit.

There is another challenge to the CTA in a district court in Ohio (Robert J. Gargasz Co. LPA v. Yellen) which seeks a nationwide injunction.

Since the Alabama ruling only helps NSBA members, and the Ohio case is still in process, we are recommending that our clients continue to comply with the CTA requirements.

Congress

Before breaking for the December 2023 recess, the U.S. House of Representatives approved a bipartisan bill, H.R. 5119, that would extend key deadlines of the CTA. The vote was 420-1. There is a companion bill in the Senate (S3625), but as of this writing, the Senate has not taken action on it.

How We Can Help

We have experts at KT who have been monitoring various provisions of the CTA. We can assist you in determining whether your Company meets various exemptions, who may be required to appear on a BOI report and whether particular ownership interests constitute “beneficial ownership.” We are also providing services to file the BOI report for your company.

Please contact Austin Eichacker for further assistance.