CLIENT%252BALERT.jpg

Corporate Transparency Act

____________________

 

The Corporate Transparency is Back in Effect With a Deadline of March 21, 2025

On February 18, 2025, the U.S. District Court for the Eastern District of Texas issued an Order in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D.Tex.), lifting the nationwide preliminary injunction against CTA enforcement.

Therefore, Beneficial Ownership Information (BOI)reporting under the Corporate Transparency Act (CTA) is once again mandatory. However, FinCEN has extended the filing deadline for BOI reports for “most companies” by 30calendar days from today. FinCEN states, “For the vast majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21,2025. FinCEN will provide an update before then of any further modification of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.”

FinCEN further states, “In keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.” Please see the notice from FinCEN for further details.

Although BOI reporting is mandatory again, the CTA remains in flux. Along with FinCEN’s possible modification of BOI reporting rules, there are still several pending lawsuits challenging the constitutionality of the CTA. Additionally, there is legislation pending in Congress to extend the BOI reporting deadline to January 1, 2026 for companies in existence prior to2024. H.R. 736 passed the House and its companion bill S.505is pending in the Senate.

DISCLAIMER: This alert is for informational purposes only and does not constitute legal advice.

We will continue to provide updates as this situation develops. If you have any questions about how the CTA impacts your business, please do not hesitate to reach out to our team at the following address:

cta@white-summers.com

2023 Notice:

On January 1, 2024, the Corporate Transparency Act (“CTA”) will go into effect, requiring millions of companies to report beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Non-exempt companies (referred to under the CTA as “Reporting Companies”) that are created or registered on or after January 1, 2024, will have 30 days from formation to comply with CTA requirements. Reporting Companies created before January 1, 2024, will have until December 31, 2024 to make their initial filing. Certain companies, such as public companies, highly regulated entities, and “large operating companies” (that meet specific requirements) are exempt from reporting requirements, and a full list of exemptions is available here. Note, FinCEN has proposed an extension from 30 to 90 days for Reporting Companies created or registered between January 1, 2024 and January 1, 2025, but such extension has not yet been approved.

We understand that our clients will have questions and concerns about the new CTA requirements and we take these inquiries seriously. We are preparing a list of resources and filing options, which we will have available prior to December 31, 2023. At this time, we anticipate recommending that our clients use a third-party filing service, such as CT Corporation or Cogency Global.

We recommend that all companies take the following steps before December 31, 2023:

  • Identify all of the legal entities for which you are handling U.S. compliance matters, including non-U.S. companies;

  • Determine which entities may qualify for an exemption;

  • Identify individuals who (a) directly or indirectly “substantially control” a Reporting Company; (b) own or control 25% or more of the Reporting Company; or (c) have “any other form of substantial control” over the Reporting Company;

  • Clean-up any unneeded or inactive entities and consider whether it may make sense to form any new entities; and

  • Begin gathering requisite information from beneficial owners for upcoming filings (e.g. name, DOB, address, passport # or other identifier).

Failure to comply with the CTA requirements, including failure to update changes within 30 days of occurrence, could result in civil and criminal penalties.

We remain committed to helping our clients assess complex legal issues and welcome your questions as you navigate this process. For additional information about the CTA requirements, please reference the following: