Corporate Transparency Act can be enforced, court rules. Here's what it means for business owners.

[BumRushDaShow]

Source: CBS News

Updated on: December 23, 2024 / 6:34 PM EST


An anti-money laundering law called the Corporate Transparency Act, or CTA, appears to have been given new life after an appeals court on Monday determined its rules can be enforced as the case proceeds. The law requires small business owners to register with the Financial Crimes Enforcement Network, or FinCEN, by Jan. 1, or potentially pay fines of up to $10,000.

The registration rule had been on hold since Dec. 3, when a federal court in Texas issued a preliminary injunction prohibiting its enforcement. But on Monday, the 5th U.S. Circuit Court of Appeals lifted the order, ruling that the decision is in the "public's urgent interest in combating financial crime and protecting our country's national security."

The CTA requires that the owners and part-owners of an estimated 32.6 million small businesses must register personal information with FinCEN, such as a photo ID and home address. With the court ruling that enforcement can proceed, many small business owners may scramble to register ahead of the Jan. 1, 2025 deadline, although businesses that started in 2024 were given 90 days to register.

Some civil liberties groups decried the ruling, saying that the regulation represents governmental overreach. "The government cannot be allowed to maintain this unconstitutional statute, which stretches beyond Congress's proper authority to regulate Americans," said the New Civil Liberties Alliance, a civil rights group, said in a statement emailed to CBS MoneyWatch. The Treasury Department did not immediately reply to a request for comment from CBS MoneyWatch.

Read more: https://www.cbsnews.com/news/corporate-transparency-act-cta-fincen-ruling-injunction-what-it-means/

[bucolic_frolic]

1. As if they don't already have all that information from financial records

You can't open, close, transfer, roll over anything without reams of personal data. You can't deal in cash. You cannot open a financial account with money orders, you can't clear a check on a money market fund, I'm not even sure you can pay a credit card bill with cash or money orders. SS numbers have been required on all financial accounts since about 1975, though some were probably grandfathered in until about 1990.

So what are they trolling for? Immigrants without SS numbers? This is a financial trolling for data on the part of big government. I doubt .02% of the data they receive will be unknown to them. Nothing novel, nothing new. Power grab choke point reinforcement.

[moniss]

2. The amazing thing to me is the stated

purpose is to get to better enforcement against money laundering. But if you read the list of organizations exempted from filing it's like a list of those most known for questionable activity. Here's the list and special note should be made that number 19 is tax exempt entities which means all of those dark money 501c-3 groups and number 20 is anybody helping them.

1 Securities reporting issuer
2 Governmental authority
3 Bank
4 Credit union
5 Depository institution holding company
6 Money services business
7 Broker or dealer in securities
8 Securities exchange or clearing agency
9 Other Exchange Act registered entity
10 Investment company or investment adviser
11 Venture capital fund adviser
12 Insurance company
13 State-licensed insurance producer
14 Commodity Exchange Act registered entity
15 Accounting firm
16 Public utility
17 Financial market utility
18 Pooled investment vehicle
19 Tax-exempt entity
20 Entity assisting a tax-exempt entity
21 Large operating company
22 Subsidiary of certain exempt entities
23 Inactive entity

https://www.fincen.gov/boi-faqs#C_2

[IbogaProject]

4. 11 Venture capital fund adviser

Covers private equity managers I think, unless this is just for consultants who get bonuses but don't get the big tax break of Carried Interest.

[moniss]

5. Yes and remember that this list is the entities that

don't have to disclose under the CTA. I'm not really worried about some Mom and Pop convenience store with an LLC being my big problem for money laundering. The ones exempted are the ones we know from experience are laundering big time.

[LeftInTX]

9. There was this landlord who owned dozens of shell companies.

A small organization was renting from them and trying to figure out WTF was going on. The small organization had not signed the lease but had inherited the lease was trying get out of it and leave the property. They were trying to figure out who actually owned the property and how utilities were being siphoned off.

We eventually found it was a doctor who was convicted of manslaughter of a patient.

[S/V Loner]

3. Glad I sold my business...

Things, like cyber security procedures along with other requirements, were getting to be too much for a one person business. It's like I was operating in a different world. Now retired.

[LetMyPeopleVote]

6. A petition for rehearing was filed

I had fun yesterday sending emails to clients.

Link to tweet

[LetMyPeopleVote]

7. The injunction against the enforcement of the CTA has been reinstated

I will need to send some emails to clients tomorrow

Link to tweet

[LeftInTX]

8. So they issued a stay several days after overturning an injunction? Ugh.....

I don't understand this law, (Corporate transparency sounds like a good thing, but maybe in this case it isn't??) but to overturn an injunction and then issue a stay on their ruling a few days later is weird and a hassle for everyone involved.

I've seen lots of small shell companies that are up to no good.

[LetMyPeopleVote]

10. Corporate Transparency Act Blocked by US Appeals Court Again

This case is weird even for the 5th Cir. I will be sending out some emails to clients

Link to tweet

https://news.bloomberglaw.com/business-and-practice/corporate-transparency-act-blocked-by-us-appeals-court-again

A Fifth Circuit panel has reinstated a nationwide injunction blocking enforcement of the Corporate Transparency Act, three days after a different panel lifted it, causing turmoil in compliance offices.

The CTA, enacted as an anti-money laundering measure, requires that US entities that existed before 2024 disclose the identities of their beneficial owners—individuals who own or control the business—by Jan. 1, 2025.

Texas Top Cop Shop Inc., a firearm retailer represented by the federalist advocacy nonprofit Center for Individual Rights, challenged the law and a district court ordered a nationwide halt to enforcement on Dec. 3. That halt was lifted on Dec. 23 by the panel of the US Court of Appeals for the Fifth Circuit that handles motions in an order that said, “The government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.”

Now a different panel of the same court, which will handle the merits of the appeal, has reversed course again.

“In order to preserve the constitutional status quo while the mertis panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction” is vacated, the merits panel wrote in an order Thursday.

[LetMyPeopleVote]

11. Corporate Transparency Act Whiplash: Fifth Circuit Reinstates Preliminary Suspension of Deadline Pending Merits Ruling

Link to tweet

https://natlawreview.com/article/corporate-transparency-act-whiplash-fifth-circuit-reinstates-preliminary-suspension

On December 3, 2024, the Eastern District of Texas issued a nationwide preliminary injunction suspending enforcement of the Corporate Transparency Act (CTA), less than a month before the deadline. The ruling temporarily prohibited the Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA, pending resolution of the lawsuit. The federal government filed a notice of appeal on December 5 and also requested that the preliminary injunction be stayed pending appeal. On December 23, the Fifth Circuit, holding that the government was likely to prevail on the merits, stayed the preliminary injunction and reinstated the January 1, 2025 deadline for CTA filings. FinCEN then voluntarily extended the deadline to January 13, 2025.

On December 26, in a startling reversal, the Fifth Circuit vacated the stay in light of the expedited ruling expected on the merits of the preliminary injunction. FinCEN has not yet issued a statement, but it is anticipated that it will comply with the injunction, while continuing to accept filings on a voluntary basis while the litigation is ongoing.

In light of ongoing uncertainty, we recommend that entities that have not yet filed be prepared to file on short notice if the preliminary injunction is once again stayed or overturned, resulting in the January 13 deadline being reinstated or a new deadline being imposed on short notice. As noted by FinCEN, entities may file notwithstanding the injunction if they choose to do so, and entities may wish to complete the filing so that they do not need to monitor the situation and to avoid high traffic to the filing website in the event a deadline is reimposed.

Separately from the preliminary injunction, which is a temporary suspension of enforcement of the requirement to file, resolution of the primary court case could take time. Please note that if you file or have already filed and the law is ultimately found unconstitutional or otherwise overturned or rescinded, you will not be under any continuing obligation regarding that filing.

Entities can of course choose not to file. However, be aware that in addition to the potential need to file on short notice should the preliminary injunction be limited, stayed, or overturned, financial institutions may inquire as to whether the entity has filed a CTA and could require filing as part of the financial institution’s anti-money laundering program.

[LetMyPeopleVote]

12. FinCEN Updates: Alert on Impact of Ongoing Litigation -Deadline Stay- Voluntary Submission Only of Beneficial Ownership

I am on the FinCen email list. Here is the latest email

Alert [December 27, 2024]: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines. On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.

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