Update: Corporate Transparency Act
12-27-2024: Update
To our valued clients,
We write to you once again to inform you of the latest turn of events concerning the legal challenges to enforcement of the Corporate Transparency Act (“CTA”) and in particular its disclosure requirements regarding Beneficial Ownership Information (BOI).
We informed you earlier this week that a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit reversed a Texas district court order in Texas Top Cop Shop, Inc., et al. v. Garland, et al. that had initially granted a preliminary injunction of the enforcement of the CTA. The 3-judge circuit court panel then reversed the district court’s injunction effectively reinstating the BOI reporting requirements. The US. Treasury’s Financial Crimes Enforcement Network (“FinCEN”) thereupon extended the applicable filing deadlines for most reporting companies to January 13.
Yesterday, however, the full Fifth Circuit Court reversed the three-judge panel, again halted enforcement of the CTA nationwide so the merits of the case can undergo expedited appellate review. Once again, and for now at least, reporting companies need not register or report their BOI but could be required to do so on short notice.
Clearly, this drama continues and we will continue to monitor and report on any further CTA developments.
12-24-2024: IMPORTANT UPDATE ON CORPORATE TRANSPARENCY ACT (CTA) REGISTRATION REQUIREMENT: MOST COMPANIES MUST REPORT BY JANUARY 13, 2025
For our valued clients,
We reported earlier this month that a federal court in Texas issued a nationwide preliminary injunction on December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al. blocking enforcement temporarily of the business owner information reporting requirements under the federal Corporate Transparency Act (CTA). This meant reporting companies would not be required to register their business owner information with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), at least while the injunction remained in effect.
Yesterday, however, the U.S. Court of Appeals for the Fifth Circuit reversed that district court order and effectively reinstated the reporting obligations of business entities under the CTA.
FinCEN has now followed up in response to the Fifth Circuit’s decision by extending filing deadlines as follows.
- Entities formed prior to January 1, 2024: new deadline is now January 13, 2025;
- Entities formed on or after September 4, 2024, with initial filing deadline between December 3 and December 23, 2024: new deadline is January 13, 2025;
- Entities formed from December 3, 2024 through December 23, 2024: add 21 days to the initial filing deadline;
- Entities on extended deadline due to disaster relief: either the extended deadline or January 13, 2025, whichever date is later.
As for other entities in general, the original CTA filing deadlines apply:
- Entities formed December 24, 2024 through December 31, 2024: within 90 days of formation;
- Entities formed on or after January 1, 2025: within 30 days from date of formation.
We will continue to monitor and report on CTA developments. Please feel free to contact our firm if you have any questions regarding the foregoing.
12-4-2024: Breaking Update
U.S. District Court Judge Amos Mazzant, sitting in the Eastern District of Texas issued a nationwide injunction against the enforcement of the Corporate Transparency Act. As of December 3, 2024, the January 1, 2025 deadline is not in effect. We will provide further updates as the case progresses.
Are You Prepared for the Corporate Transparency Act and the New York LLC Transparency Act?
If you are an owner of a limited liability company, corporation, or other business entity, or plan to form one in the future, you are most likely subject to the Corporate Transparency Act and may be subject to New York’s corresponding New York LLC Transparency Act. Failure to comply with the requirements of these statutes could result in substantial fines and penalties.
The Corporate Transparency Act (“CTA”)
The CTA, which went into effect on January 1, 2024, requires that all US companies, and all foreign companies authorized to do business in the United States, provide specific and personally identifiable information about the entity, its beneficial owners and applicants to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCen).
There are 23 categories of companies that are exempt from filing reports with FinCen, including banks, insurance companies, accounting firms, tax exempt entities and large operating companies (as these entities are engaged in businesses that are subject to regulatory reporting and disclosures as a matter of course). Aside from these exemptions, most companies will be required to file a report with FinCen by the end of 2024.
Companies already in existence as of January 1, 2024, have until January 1, 2025 to file the initial report. Any new company formed after January 1, 2024, but before January 1, 2025, is required to file the report with FinCen within 90 days of the date it is created or authorized to do business in any state. Any new company formed after January 1, 2025 will be required to file the report with FinCen within 30 days of the date it is created or authorized to do business in any state.
Failure to comply with the reporting requirements of the CTA can result in fines of $500 per day, and criminal penalties including imprisonment.
Addition information, and access to the filing system can be found on FinCen’s website: https://www.fincen.gov/boi
New York LLC Transparency Act (“NYLTA”)
The NYLTA, which will go into effect on January 1, 2026, mirrors the CTA but is only applicable to limited liability companies formed or authorized to do business in New York. As with the CTA, any limited liability company that does not fall within one of the CTA’s 23 exemptions must report specific and personally identifiable information about the entity, and beneficial owners to New York Department of State.
Any new limited liability company formed after January 1, 2026 is required to file the report, or proof of exemption, within 30 days of formation or authorization to do business in New York. Limited liability companies already in existence as of January 1, 2026, have until January 1, 2027 to file the initial report. Once an initial report has been filed, all entities are required to file an annual statement either confirming or updating the information.
Failure to comply with the reporting requirements of the NYLTA can result in a fine of up to $500 per day.
Cristin M. Keegan, Esq.
