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On January 23, the U.S. Supreme Court said it would allow the U.S. Government to implement the Corporate Transparency Act (CTA), which will require millions of U.S. businesses to file information to the U.S. Treasury on their “beneficial” owners, that is, individuals who directly or indirectly own or control those companies.
In so ruling, the justices stayed an injunction blocking the enforcement of the CTA, allowing the government to move ahead with enforcement of the law while its merits are being debated in the U.S. Court of Appeals for the Fifth Circuit, which has scheduled oral arguments on the issue for March 25.
Concurring with the decision, Justice Neil Gorsuch said that he would “go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.” Justice Ketanji Brown Jackson dissented, saying she didn’t see a need for intervention because the government hadn’t proven exigency.
Under the law, most incorporated business entities that existed before 2024 had until January 13 to file their ownership and control information with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). That bureau estimates 32.6 million U.S. businesses will need to disclose beneficial ownership information (BOI) or face penalties, as will an estimated five million new businesses incorporated annually.
Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas blocked enforcement of the CTA nationwide on December 3. That order was lifted on December 23 by the motions panel of the Fifth Circuit Court of Appeals. Enforcement was again halted when a different Fifth Circuit panel reinstated the injunction on December 27. On December 31, the U.S. Department of Justice asked the Supreme Court to weigh in on the matter.
FinCEN said after the injunction was reimposed that BOI can still be disclosed on a voluntary basis. If disclosure becomes mandatory, a business would face a $500 per day fine for knowingly failing to file. As of December 3, about 10 million businesses had submitted BOI, according to FinCEN information.
Tom O’Saben, a director of tax content and government relations at the National Association of Tax Professionals, told Bloomberg Law the group has advised that businesses should err on the side of caution by filing their BOI.
HBK is not a law firm and cannot provide legal advice to clients. We encourage business owners to consult with your attorneys regarding their CTA reporting requirements.
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