The Federal Corporate Transparency Act (CTA): What Business Owners Need to Know

Jaime Aulicino, EA
UPDATE: Posted December 26, 2024
On December 23, 2024, the Fifth Circuit Court of Appeals ruled against the injunction put into place on December 3, making the Beneficial Ownership Information Report required once again. That evening, FinCEN published new deadlines in light of the timing of the decision.
For companies that began prior to January 1, 2024, the new deadline is January 13, 2025. For companies beginning on or after January 1, 2024, please visit https://www.fincen.gov/boi to find your applicable deadline.
While the issue is still being litigated across the country, the Fifth Circuit stated “the government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.” Because of this, LPC strongly urges anyone affected by the CTA to file their report(s) as soon as possible to avoid severe penalties.
Louis Plung & Company will continue to update this post with further developments.
UPDATE: Posted December 6, 2024
On December 3, 2024, a Texas court issued a nationwide injunction on the CTA and BOI filing requirements. This decision has temporarily stopped the enforcement of the deadline of 12/31/2024 to file the BOI report.
As of today, FinCEN has yet to address this decision, but we expect the agency to file an appeal. It is impossible to predict whether an appeal process will succeed for FinCEN, so the validity of this filing requirement is unclear. With only a few weeks left before the original filing deadline, it is also unclear whether a final decision will be reached before then.
It is up to business owners to decide whether to proactively file by the original due date or wait to see if anything changes during a possible appeal process. If you have already filed your BOI report, this injunction also temporarily stops the enforcement of filing an updated report when necessary. Again, this could be overturned.
We highly encourage anyone impacted by the CTA to continue to monitor for changes.
Louis Plung & Company will continue to update this post with further developments.
UPDATE: posted October 31, 2024
Despite numerous court challenges filed across the country, the Corporate Transparency Act (CTA) is still in full effect with a filing deadline of January 1, 2025. With most of these court cases are at a standstill, the Louis Plung & Company team is advising all non-exempt business owners to file before the end of the year as the penalties for not filing the Beneficial Ownership Interest (BOI) report are quite severe.
On October 3, Financial Crimes Enforcement Network (FinCEN) quietly rolled out 17 new FAQs and updated 8 pre-existing FAQs. These updates provide additional guidance on the reporting requirements including questions about beneficial ownership and exemptions. For a look at the FAQs, go to Beneficial Ownership Information | FinCEN.gov
Please keep in mind, if your entity began on or after January 1, 2024, you will have a different due date for the report.
Louis Plung & Company will continue to update this post with further developments.
UPDATE: posted May 6, 2024
After the initial ruling on March 1, the Department of Treasury has decided to appeal the court’s decision that the Corporate Transparency Act (CTA) is unconstitutional. The Louis Plung & Company (LPC) team is continuing to monitor this case, but it is important to know that the deadline of January 1, 2025 remains in effect as of the date of this post.
While the initial court case occurred in Alabama, new cases have been brought in Maine and Michigan. These arguments are similar in nature and seek to dismiss the reporting requirement. LPC is monitoring these cases as well.
The American Institute of Certified Public Accountants (AICPA) has been writing letters and meeting with officials to request a delay in the reporting deadline. The organization states the court rulings are confusing and enforcement should be delayed until court cases have been resolved.
On April 18, FinCEN quietly rolled out 16 new FAQs, providing additional guidance on the reporting requirements. Some of these help to answer questions about beneficial ownership, exemptions, and more.
Louis Plung & Company will continue to update this post with further developments.
UPDATE: posted March 4, 2024
On Friday, March 1, 2024, the Corporate Transparency Act (CTA) was declared unconstitutional by Judge Liles C. Burke of the U.S. District Court for the Northern District of Alabama.
The ruling, following a challenge by the National Small Business Association, asserts that the CTA “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.”
While this ruling essentially puts Beneficial Ownership Information (BOI) reporting on hold, it is likely that this issue will continue to play out in the federal court system.
Louis Plung & Company will continue to update this post with further developments.
Original post from February 1
The Federal Corporate Transparency Act (CTA) became effective on January 1, 2024, to combat money laundering, terrorism, drug trade and other illegal activities with shell companies set up in the United States (U.S.). The law creates a new filing requirement for many smaller domestic and foreign entities. The effected entities must file a Beneficial Ownership Information (BOI) report online with the Financial Crimes Enforcement Network (FinCEN). The filing requirements depend on when the entity was established and requires updates each time required information changes.
Who are Beneficial Owners?
Beneficial owners are the individuals who directly or indirectly own or control at least 25% of the ownership interests of a reporting company or exercise “substantial control” over a reporting company. Their information will be included in the report that is filed with FinCEN, including, but not limited to, a digital photocopy of a driver’s license or passport.
Who Must File
The entities that meet these new requirements are all domestic and foreign entities that have filed formation or registration documents with a U.S. state or tribal jurisdiction unless an exemption applies. Exemptions are made for several entities– including banks, publicly traded companies, public accounting firms, certain registered investment companies and investment advisors, tax-exempt entities, large operating companies and more.
There are 23 exemptions, a list of which can found be found here: https://www.fincen.gov/boi-faqs#C_2. One exemption that may apply more than any other is the large operating company exemption (#21). The CTA describes a large operating company as an entity that meets all three of the following criteria:
- Employs more than 20 full-time employees in the U.S.
- Filed more then $5 million in gross receipts or sales in the prior year (excludes foreign receipts)
- Has an operating presence at a physical office in the U.S.
When to File
Companies created before January 1, 2024, must file the BOI report by January 1, 2025. If created on or after January 1, 2024, and before January 1, 2025, the company must file the BOI report within 90 days of receiving actual or public notice that its creation has become effective. If the company is created on or after January 1, 2025, the filer has 30 days after the date of notice. The report is not an annual filing; however, changes in the required disclosure must be reported within 30 days. These changes include beneficial ownership changes, exemption status, transfers of ownership when a minor child reaches age of majority and change in name or address.
Falsifying information or failure to report can lead to civil penalties of up to $500 per day. As the violation continues, criminal penalties may be imposed of up to $10,000, imprisonment of up to two years or a combination of fines and imprisonment.
Security
The BOI database is non-public and is held at the highest level of cyber security. FinCEN has the right to disclose information held in this database to U.S. federal agencies, state and local agencies, foreign law agencies, financial institutions, federal regulators, and the U.S. Treasury when it is deemed necessary.
Questions?
If you have any questions or concerns with these Acts, please reach out to your trusted Louis Plung & Company advisor or email [email protected]. For more information and a full list of exempted entities, please visit https://fincen.gov/.