Update on The Corporate Transparency Act and Beneficial Ownership Information Reporting

Written by David Newman, JD LMC Tax & Legal Manager

The Corporate Transparency Act (CTA) and its requirement to report Beneficial Ownership Information (BOI) remain in a state of uncertainty as the legal challenges surrounding its enforcement continue. A nationwide injunction currently blocks the Treasury Department’s enforcement of the CTA, but the case, Garland v. Texas Top Cop Shop, has reached the Supreme Court, which may decide on the next steps.

This update highlights the latest developments in the CTA’s implementation and what organizations should keep in mind as the situation evolves.

Nationwide Injunction Blocks CTA Enforcement

The CTA was set to impose detailed reporting requirements on an estimated 30 million business organizations. These requirements would have mandated organizations to disclose information about individuals who own or control at least 25% of the entity to the Financial Crimes Enforcement Network (FinCEN). Noncompliance—whether through omission or errors—could result in civil and criminal penalties.

However, enforcement remains paused due to a nationwide injunction issued by a federal district court. The government has requested that the injunction’s scope be narrowed to apply only to the parties involved in the case, rather than to all organizations nationwide. If the Supreme Court decides to limit the scope of such injunctions, it could significantly change how and when the CTA is enforced.

What This Means for Organizations

With the CTA temporarily on hold, organizations are not currently required to comply with the BOI reporting requirements. However, businesses should be prepared for possible updates, as the timeline for compliance remains uncertain.

Here are a few key points to consider:

• Filing Deadlines May Shift: Depending on the outcome of the case, FinCEN may need to issue new compliance timelines or implement staggered deadlines.
• No Legislative Delays Yet: Recent Congressional discussions about delaying the CTA’s effective date did not result in legislative changes. Future action remains uncertain.
• Monitoring Compliance Requirements: Organizations should continue to evaluate ownership structures and maintain accurate records to ensure readiness if the CTA’s requirements are enforced.

Supreme Court Review of Legal Challenges

At the heart of the legal challenge is whether the CTA aligns with constitutional limits under the Commerce Clause, which regulates interstate commerce. Critics argue that the CTA goes beyond this scope, as it applies to organizations based solely on their incorporation status, not on any actual economic activity.

The Supreme Court’s decision in this case could clarify not only the CTA’s fate but also the broader question of when federal courts can issue nationwide injunctions.

Stay Informed and Prepared

LMC professionals are closely monitoring the latest updates on the CTA and its BOI reporting requirements. We are committed to staying informed and sharing valuable insights to keep our clients up to date on any changes or new developments.