In 2021, Congress passed the Corporate Transparency Act (CTA) with the goal of combating money-laundering, financing of terrorist activities, and tax evasion. The CTA requires that business entities, including corporations, limited liability companies, entities created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe, or foreign companies registered to do business in any U.S. state or Indian tribe, file reports detailing their owners, officers, and other control persons with Financial Crimes Enforcement Network (FinCEN). In September 2022, final rule implementing the act set the reporting deadline for most entities on January 1, 2025.
As of December 4, 2024, a Texas-based federal court has issued a preliminary injunction, barring enforcement of the CTA nationwide. This comes just weeks before the Jan. 1, 2025 reporting deadline. At this time, enforcement has been put on pause. The federal government is expected to appeal the court’s decision. As this is not a final decision, enforcement could resume if the injunction is later reversed. If the Supreme Court upholds the CTA, there is a possibility the 12/31/2024 filing deadline could be retroactively applied, so taxpayers may want to consider completing these filings pending the court decision. It is expected that a grace period to continue the filings will be given if the CTA is upheld, but the government is not obligated to extend one. Clients should consult with their attorneys and advisers to determine the best course of action in light of this injunction.
About the Author
Matt McKinney is a tax manager in DHW’s Hickory office. Matt has been with the firm for over 10 years and assists business owners navigate the complex and ever-changing tax landscape. Matt can be reached by calling 828-322-2070 or via email at mattm@dhw.cpa