Corporate Transparency Act Looms Over Small Businesses

UPDATE 12/17/2024: On December 13 the Department of Justice (DOJ) filed an emergency motion with the Fifth Circuit Court of Appeals to stop the pending injunction; they asked for a ruling by December 27, 2024. The Fifth Circuit, of its own accord, pushed up the responses to December 19, 2024. An ongoing appeal of the preliminary injunction also sits in District Court.

If the Fifth Circuit denies DOJ, business owners who choose not to report should be shielded for failing to report by January 1, 2025 (due to the preliminary injunction). If the Fifth Circuit grants the DOJ’s request, businesses will again be obligated to file, possibly by the original January 1, 2025 deadline.

UPDATE 12/14/2024: Thanks to a sharp-eyed subscriber, we learned that a federal judge in Texas issued on December 3 a nationwide injunction against the CTA and its reporting mandate in a lawsuit filed by the National Federation of Independent Business (“NFIB”). With court cases in play — the nationwide stay could be lifted, extended, or modified — you should still consult your attorney or CPA about your next steps, if you haven’t done that already.

Do you own or run a small business? Are you an officer in your neighborhood homeowners association? Are you part of an LLC or incorporated entity?

Talk to your CPA or attorney about the Corporate Transparency Act (CTA), if you haven’t already.

Do it NOW because the Corporate Transparency Act of 2021 mandates that some 32.6 million small businesses begin submitting beneficial ownership information (“BOI” includes birthdates, drivers’ licenses, and financial details) by January 1, 2025. Even if your organization is exempt, you must still file to explain the exemption.

CTA is designed to combat money laundering, says the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), who explains:

The data helps identify the people who directly or indirectly own or control a company, making it “harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.

And, yes, there’s more than one lawsuit against this unconstitutional over-reach by the federal government. Another one currently in a holding pattern due to a temporary injunction in favor of the plaintiffs was filed by the National Small Business Association (NSBA). The trick is, that injunction blocking the reporting deadline applies only to NSBA members. The NFIB injunction is nationwide.

Criminal Penalties

So, if you have a 25% or greater “beneficial ownership” in a business with less than $5 million in gross sales and less than 20 employees and you haven’t yet complied, you may be subject to “civil penalties of up to $591 a day for each day violation continues” and up to $10,000 in criminal fines/up to two years in prison!

Corporate Transparency Act is Part of 2021 NDAA

Legislation creating the onerous Corporate Transparency Act was passed by the Senate on December 11, 2020 with a veto-proof majority as part of the FY2021 National Defense Authorization Act (NDAA).

Critics like Congressman French Hill say the information FinCEN seeks is readily available throughout other government sources; his office is reporting that FinCEN has received only about 9.5 million filings so far.

Don’t get caught in the FinCEN crosshairs, talk to your attorney or CPA today!

A simple explainer:

— from AttorneyBishoy on YouTube

Elizabeth Sotallaro

God’s child, Arkansas conservatarian
#TheMoreYouKnow