Corporate Transparency Act Injunction Gives Temporary Relief from Reporting Obligations
On December 3rd, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction that blocks the enforcement of the Corporate Transparency Act (CTA) (31 U.S.C. § 5336) and the Reporting Rule (31 C.F.R. 1010.380), while also halting the year-end deadline for submitting Beneficial Ownership Information reports. To understand the implications, MCCD sought general legal advice, which we are relaying as follows:
General information:
- This is temporary. The injunction could move at any time, and businesses will then be back on the hook.
- Delay filing or voluntary file if you haven’t already filed on the FinCen website.
- A decision will not be made by year-end. If the law is reinstated, businesses will have a new deadline for compliance.
- Pay attention to the news. Follow the news and official updates on the FinCen website.
Forbes also offers some recommended next steps for business:
For businesses that have filed with FinCEN:
- Pause Compliance Efforts: The injunction currently halts enforcement of the CTA. While FinCEN may appeal, no immediate action is required at this stage.
- Monitor Legal and Administrative Developments: Stay updated on litigation outcomes and any policy shifts under the next administration.
- Protect Data: Ensure that any previously submitted beneficial ownership information is safeguarded against potential misuse.
For businesses that have not filed with FinCEN:
- Delay Filing: The nationwide injunction means that no business is currently required to comply with the CTA, but further guidance or court decisions could reinstate the act’s enforceability.
- Consult Legal Counsel: Businesses should work with legal advisors to evaluate their exposure under the CTA if the injunction is lifted or enforcement resumes.
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Prepare for Potential Compliance: If the injunction is overturned on appeal, businesses may need to act quickly to meet reporting deadlines. Having compliance mechanisms in place will help mitigate risks.
For a general explanation of the Corporate Transparency Act, we recommend this Forbes article as a practical guide for small businesses.
Disclaimer: The content is provided for informational purposes only and may not reflect the most up-to-date laws in your jurisdiction. It is not intended, and should not be construed, as legal advice for any specific situation or set of circumstances.