Corporate Transparency Act (CTA) Updates: Essential Information for Businesses

July 24, 2024

By: Michael Castle

As previously discussed, the Corporate Transparency Act (CTA) went into effect on January 1, 2024. This legislation requires certain entities to report “beneficial owners” to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

For a detailed discussion on the CTA and reporting requirements, see the prior blog here. The purpose here is to remind you of the reporting requirements and update you on changes and updates since the January 2024 post.

On Friday March 1, 2024, the CTA was declared unconstitutional by a US District Court Judge in Alabama. The opinion notes the act “exceeds the Constitution’s limits on the legislative branch and lacks sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”

The Court ruled that the government could not enforce the CTA against the plaintiffs in the case (the National Small Business Association). FinCEN has indicated that they will continue to enforce the CTA with the exception specifically for National Small Business Association (“NSBA”) members. There will likely be additional litigation and clarifications on this ruling, but at this time, any entity not a member of the NSBA should continue to file BOI reports.

In addition, FinCEN has recently updated the frequently asked questions to clarify certain specific situations. One necessary clarification concerns entities that close during 2024. If the entity were open before December 31, 2024, and would have been required to file a report, then the entity would still be required to file by December 31, 2024, despite closing. The same applies to a new entity opening and closing before the reporting deadline.

Wiss recommends that new entities created after January 1, 2024, follow the reporting guidelines and deadlines in the CTA. Entities in existence before December 31, 2023, should organize all required information now and file the report in the fall. Some of these decisions may be complicated and you should not wait to gather the information needed.

While Wiss is not assisting with the filing of Beneficial Ownership reports or providing any form of advice, we will continue to help educate. FinCEN has created a website with guidance here, which is an excellent resource for up-to-date information. Wiss recommends you discuss your specific situation with your legal advisors.