CTA: Synopsis and Financial Implications
Important Updates:
On December 3, 2024, the United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA) and stayed the CTA’s upcoming January 1, 2025 reporting deadline. See attached document. The U.S. government appealed the decision to the Fifth Circuit Court of Appeals. Since then, the Fifth Circuit Court of Appeals at first halted this stay, then reversed itself and allowed the stay to continue (essentially blocking nationwide enforcement of the CTA). The U.S. Government appealed to the U.S. Supreme Court, which sided with the Government, and reversed the Fifth Circuit Court’s stay of the CTA, pending its review of the merits (with oral argument scheduled for March 25, 2025).
Meanwhile, adding to the confusion, in a separate decision, Smith v. Department of the Treasury, a different Texas District Court, issued another nationwide injunction of the CTA – one unaffected by the U.S. Supreme Court decision. Smith was decided by Judge Kacsmaryk in the Amarillo Division of the Northern District of Texas, whereas Texas Top Cop Shop was decided by Judge Mazzant in the Sherman Division of the Eastern District of Texas.
For our recent alerts explaining these confusing developments, please see: https://www.linkedin.com/in/walt-sapronov-4909021/recent-activity/all/
Meanwhile, a synopsis of the CTA (as originally enacted), the now stayed reporting deadlines, and its financial and investment implications is set forth below.
Synopsis and Implications:
Effective January 1, the Corporate Transparency Act (CTA) imposes beneficial ownership reporting on an estimated 33 million small businesses including limited liability companies, corporations, and others. The purpose of the CTA is to crack down on money laundering and other financial crimes. The overwhelming majority of small businesses course have nothing to do with such illicit activities. Even so, unless otherwise exempt, all such existing companies must report information to the U.S. government about their beneficial owners by the fast approaching deadline of January 1, 2025. Failure to comply with the CTA can trigger significant civil penalties ($500 per day up to $10,000) and up to two years of imprisonment. Unauthorized use or disclosure of Beneficial Ownership Information (BOI) can trigger up to $250,000 in fines and up to five years’ imprisonment. For a brief synopsis of the CTA and recent related developments, please see CTA Halted Again – Confusion Reigns 12.30.2024.
The CTA also carries implications for companies’ financial transactions. For CTA investor implications, please see CTA Synopsis – Investment Transactions 9-10-24. For CTA implications for loan an other banking transaction, please see CTA Synopsis – Banking Transactions 9-18-24.
If you are in need of CTA compliance assistance or wish further information about this important legislation, please contact us at [email protected], [email protected] or (770) 399-9100.