The Current State of the Corporate Transparency Act
The Current State of the Corporate Transparency Act
The Corporate Transparency Act (CTA) is a bill initiated by the US government that requires businesses to reveal all beneficial owners. The CTA was passed into law as a measure to reduce money laundering through business entities. Despite the clear intentions behind the CTA, confusion exists over its enforceability as different courts and agencies have issued conflicting rulings. For instance, a Fifth Circuit panel initially reinstated enforcement of the CTA, only to have another Fifth Circuit panel later halt its enforcement.
What does the injunction of the CTA’s enforceability mean for business owners? In short, businesses are caught in the middle, wondering whether to continue with voluntary ownership disclosure. However, one thing is certain - after the Fifth Circuit ruling; businesses are not currently required to file their beneficial ownership information with the Treasury’s Financial Crimes Enforcement Network (FinCEN).
FinCEN released a statement on their official website stating that, "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."
It is unclear whether the Act will ultimately be upheld or stricken down as unconstitutional. In its order reinstating the injunction, the Fifth Circuit Court of Appeals panel reasoned, "in order to preserve the constitutional status quo while the merits 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 enjoining enforcement of the CTA and the Reporting Rule is VACATED."
A substantial number of businesses acted in good faith by complying when the CTA was enacted, providing ownership information willingly to FinCEN. Now, the number of businesses ready to disclose ownership details may fall as a result of uncertainties and confusion caused by the back-and-forth CTA injunction lifts and reinstatements. The Fifth Circuit panel has scheduled arguments on March 25, 2025 to address the appeal filed by the government.