Corporate Transparency Act in Limbo, Part 2
The Corporate Transparency Act (CTA), enacted in 2021, established significant new reporting requirements for businesses. Under the CTA, Reporting Companies are required to submit both initial and updated reports to the Treasury Department, detailing information about their beneficial owners—individuals with 25% or more ownership—and those with substantial control, such as officers and directors.
However, on December 26, the Fifth Circuit Court of Appeals upheld an order delaying the enforcement of these obligations. This means Reporting Companies will not be required to file beneficial ownership or control person reports under the CTA until at least April 2025.
This delay raises an important question: what comes next? As experts in business compliance, we are monitoring these developments closely and are here to provide the guidance and support you need to navigate these evolving requirements. Stay informed with us as we continue to track and interpret these changes for your business.
The Government Appeals to the Supreme Court
The government appealed the December 26 re-suspension of the CTA to the Supreme Court. The Supreme Court agreed to hear the matter and the plaintiff’s reply to the government’s appeal was due January 10. A decision could come at any time. The Supreme Court has agreed to rule on the issue to address nationwide injunctions generally, rather than to rule specifically on the CTA suspension at issue. Nationwide injunctions of government regulations are a heavily debated area of law; some believe such injunctions serve to check agency power, while others argue for tightening the standard for their issuance.
The Potential Outcomes
The following summarizes the various potential outcomes and their timeframes in descending chronological order:
- Emergency Motions on Effect of Order Pending Appeal (the present Issue – decision could come anytime)
- If the government wins at the Supreme Court: CTA filings will be back in effect until a decision is made on the appeal of the order; FinCEN will set new deadlines
- If the government loses: CTA filings will remain suspended until the appeal decision is made
- No further appeals
- Appeal of the Order (will decide CTA obligations until the end of Top Cop Shop trial, appeal decision sometime after March 25)
- If the government wins the appeal at the 5th Circuit: CTA filings will be back on for the duration of the Top Cop case, until a final decision is made by the District Court; New deadlines set
- If the government loses: CTA filings are suspended until the final District Court decision
- District Court Final Decision (longer-term ruling on the constitutionality of CTA, the decision will come well into 2025 or later)
- If the government wins: CTA filings are back in effect with new deadlines – the plaintiff may appeal the decision but CTA will be in effect
- If the government loses: CTA is not in effect – the government may appeal but CTA will not be in effect
As legal developments continue to evolve, it’s essential for businesses to stay informed and take proactive steps to protect their interests. While filing Beneficial Ownership Reports is not yet mandatory, submitting them voluntarily can serve as a precautionary measure to stay ahead of potential requirements. To fully understand how these rulings might impact your obligations under the Corporate Transparency Act (CTA) and ensure ongoing compliance, we strongly recommend consulting with your legal counsel or advisor.
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