LEGAL CHALLENGES TO THE CTA Should You Wait or Act Now on Your Reporting Requirements?
One of your most important responsibilities as a business owner is ensuring your company stays compliant with your industry’s laws, regulations, and standards. Business owners always need to manage something related to finances, staffing, or workplace safety, but this past year, a new transparency standard went into effect. The federal Corporate Transparency Act (CTA) rules went into effect on Jan. 1, 2024. This legislation requires nearly all small and medium-sized businesses to report any beneficial ownership information (BOI) of their company to the Financial Crimes Enforcement Network (FinCEN). The deadline to file was Jan. 1, 2025, but that was thrown into question when a federal district court in Texas issued a nationwide
preliminary injunction, temporarily blocking any enforcement of the CTA and its reporting requirements.
This isn’t the first time that the CTA has faced legal challenges. In March 2024, an Alabama court declared the act unconstitutional. However, FinCEN quickly appealed and stated they would continue implementing and enforcing the act outside the small group of plaintiffs in Alabama. FinCEN’s response to the Texas injunction is different. It stated that companies were not required to file BOI with FinCEN and were not subject to liability. It also held that reporting companies could still voluntarily submit this information while they fight the injunction in court. Business owners who have yet to file their beneficial ownership information with FinCEN now have a decision to make. There is a chance the appeals in Alabama and Texas could kill the CTA and require Congress to take another shot at crafting a similar law. If you firmly believe this will be the outcome, hold off on filing your information, waiting for news that the CTA is no more. This may save you some time you could allocate elsewhere, but if the CTA remains, you might have to scramble to report that information before any deadline. Another option is to gather and sit on all relevant information until the court battle concludes. That way, you can submit it promptly, even on a shortened deadline. Your last option is to file your BOI with FinCEN now. You can save yourself from a potential future headache and get it out of the way early. Remember that punishments for failing to file include fines of at least $500 per day up to $10,000. There’s no telling how this will all play out right now, but the current situation leaves you with a decision: Will you be proactive or reactive?
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