By Ryan Beethoven-Wilson, CPA, Partner
What the CTA ruling means for your business
In previous articles on our blog, we highlighted the provisions of the 2021 Corporate Transparency Act (CTA) and the Beneficial Ownership Reporting Rules that were scheduled to go into effect beginning January 1, 2024.
Impact of Alabama federal district court CTA ruling
On March 1, 2024, a federal district court in Alabama declared the CTA unconstitutional. The Court found that the CTA goes beyond the legislative authority of Congress as granted by the US Constitution. The district court granted the plaintiffs’ motion for summary judgement. The plaintiffs in the case included the National Small Business Association, which has over 65,000 members.
This ruling effectively suspends the enforcement of the CTA against the plaintiffs in the case and MAY suspend enforcement against all potential reporting companies.
The District Court ruling is sure to be appealed, possibly all the way to the United States Supreme Court.
It is expected that the Financial Crimes Enforcement Network (FinCEN) will issue notices concerning the ruling and the impact on the CTA in the very near future.
The American Institute of Certified Public Accountants (AICPA), which continues to push for suspension of the reporting, issued a statement that small businesses should continue to file the reports.
What you still need to know for reporting of beneficial ownership information
Under the terms of the CTA, any legal entity, including domestic corporations, limited liability companies, limited partnerships, single member LLCs, must file reports of beneficial ownership with FINCEN. A beneficial owner directly or indirectly exercises substantial control the reporting company or controls at least 25% for the ownership interests of the reporting company.
The CTA rules contain a list of at least 23 entities that are exempt from the reporting requirements.
Under the original FinCEN rules, an entity in existence as of December 31, 2023, had 90 days to file the beneficial ownership report with FinCEN. New legal entities created in 2024 and later were required to file the beneficial ownership report within 30 days of the formation of the entity.
Recently, FinCEN extended the filing deadlines for reporting entities. Companies created prior to January 1, 2024, now have until January 1, 2025, to file their initial reports with FinCEN. New legal entities created after January 1, 2024, have 90 days from the date of formation to file the initial reports.
Your Keiter Opportunity Advisors will continue to monitor and keep your business informed on the legal developments and compliance requirements regarding CTA. Questions on how to meet the CTA reporting requirement for your business? Contact your Keiter Opportunity Advisor.
Source:
Federal court holds Corporate Transparency Act unconstitutional | Journal of Accountancy
About the Author
Ryan Beethoven-Wilson, CPA, Partner
Ryan’s practice focuses on business tax planning and compliance, general business consulting, financial reporting, and individual tax for privately-held clients in the professional services, emerging business, manufacturing, construction, retail, and real estate industries among others. Ryan also helped launch Keiter’s Opportunity Zone team, monitoring developments and consulting with investors and entrepreneurs on Opportunity Zone tax incentives. Ryan is a leader on several of Keiter’s industry niche teams.
More Insights from Ryan Beethoven-WilsonThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
