What does that mean for my business?
Millions of businesses across the United States have begun grappling with the Corporate Transparency Act’s (CTA) new ownership reporting requirements.
Since the CTA became effective on January 1, 2024, owners of legal entities subject to the CTA have started the process of gathering and reporting ownership information to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
However, such information gathering and reporting has not come without protest from some affected by the CTA. The National Small Business Association (NSBA) and an individual, Isaac Winkles, sued the Department of Treasury, the Treasury Secretary Janet Yellen, and the Acting Director of FinCEN, arguing the CTA is unconstitutional.
The case asserted that Congress lacked the authority under the U.S. Constitution to enact the CTA’s information disclosure and reporting requirements.
On March 1, 2024, the U.S. District Court Judge for the Northern District of Alabama held that the requirements of the CTA fell outside of limits placed on Congress and the legislative branch by the U.S. Constitution. As a result, the Court ruled that FinCEN is unable to enforce the requirements of the CTA against the plaintiffs in the case—the NSBA, members of the NSBA, and Isaac Winkles and his entities.
It can be expected that there will be considerable future legal action in both NSBA v. Yellen and in similar cases across the country, as evidenced by a Notice of Appeal filed by the government in NSBA v. Yellen on March 11, 2024.
Though the future of the CTA is uncertain, for now, the beneficial ownership reporting requirements are still required by all entities subject to the CTA and that are not involved in NSBA v. Yellen. FinCEN has indicated that reporting is still required in a Notice issued on March 4, 2024, on its website.
The attorneys at Abrahams Kaslow & Cassman LLP are prepared to help guide you through the requirements of the CTA, provide information on the most recent legal and legislative developments related to the CTA, and file with FinCEN on behalf of your business. Please contact Alex Montoya at [email protected] for more information.