Treasury delays deadline for small businesses to file new form to avoid risk of fines for noncompliance

[BumRushDaShow]

Source: NBC News/CNBC

Dec. 26, 2024, 3:39 PM EST / Source: CNBC


The U.S. Treasury Department has delayed the deadline for millions of small businesses to Jan. 13, 2025, to file a new form, known as a Beneficial Ownership Information report.

The Treasury had initially required many businesses to file the report to the agency’s Financial Crimes Enforcement Network, known as FinCEN, by Jan. 1. Noncompliance carries potential fines that could exceed $10,000.

This delay comes as a result of legal challenges to the new reporting requirement under the Corporate Transparency Act. The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

Businesses and owners that didn’t comply would potentially face civil penalties of up to $591 a day, adjusted for inflation, according to FinCEN. They could also face up to $10,000 in criminal fines and up to two years in prison. However, many small businesses are exempt. For example, those with over $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Read more: https://www.nbcnews.com/business/business-news/treasury-delays-deadline-small-businesses-file-new-form-avoid-risk-fin-rcna185488

[LetMyPeopleVote]

1. The injunction against enforcement of the CTA has been reinstated

Link to tweet

[LetMyPeopleVote]

2. Corporate Transparency Act Blocked by US Appeals Court Again

This case is weird even for the 5th Cir. I will be sending out some emails to clients

Link to tweet

https://news.bloomberglaw.com/business-and-practice/corporate-transparency-act-blocked-by-us-appeals-court-again

A Fifth Circuit panel has reinstated a nationwide injunction blocking enforcement of the Corporate Transparency Act, three days after a different panel lifted it, causing turmoil in compliance offices.

The CTA, enacted as an anti-money laundering measure, requires that US entities that existed before 2024 disclose the identities of their beneficial owners—individuals who own or control the business—by Jan. 1, 2025.

Texas Top Cop Shop Inc., a firearm retailer represented by the federalist advocacy nonprofit Center for Individual Rights, challenged the law and a district court ordered a nationwide halt to enforcement on Dec. 3. That halt was lifted on Dec. 23 by the panel of the US Court of Appeals for the Fifth Circuit that handles motions in an order that said, “The government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.”

Now a different panel of the same court, which will handle the merits of the appeal, has reversed course again.

“In order to preserve the constitutional status quo while the mertis panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction” is vacated, the merits panel wrote in an order Thursday.

[Unwind Your Mind]

3. I was getting ready to write that email yesterday

This thing has been a moving target for some time, it’s giving me headaches. My plan as of now is to still comply with the January 13 deadline.

I have two issues:

One is that notification has been spotty, I might not have even known about it if one of my clients didn’t ask. And then such a large fine, that feels wrong to me.

Two is that all of this information is already kept by the state, it’s redundant and annoying.

I guess I better get back to work

[LetMyPeopleVote]

5. Many if not most of my clients have filed already

[Hugin]

4. Official links... Beware, there's quite a bit of fraud out there on this requirement.

As per this link on the FinCEN home page:

Alert: FinCEN has learned of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act.

HOMEPAGE: https://www.fincen.gov/boi

FAQ: https://www.fincen.gov/boi-faqs#C_2

What a clusterfuck.

[LetMyPeopleVote]

6. Corporate Transparency Act Whiplash: Fifth Circuit Reinstates Preliminary Suspension of Deadline Pending Merits Ruling

Link to tweet

https://natlawreview.com/article/corporate-transparency-act-whiplash-fifth-circuit-reinstates-preliminary-suspension

On December 3, 2024, the Eastern District of Texas issued a nationwide preliminary injunction suspending enforcement of the Corporate Transparency Act (CTA), less than a month before the deadline. The ruling temporarily prohibited the Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA, pending resolution of the lawsuit. The federal government filed a notice of appeal on December 5 and also requested that the preliminary injunction be stayed pending appeal. On December 23, the Fifth Circuit, holding that the government was likely to prevail on the merits, stayed the preliminary injunction and reinstated the January 1, 2025 deadline for CTA filings. FinCEN then voluntarily extended the deadline to January 13, 2025.

On December 26, in a startling reversal, the Fifth Circuit vacated the stay in light of the expedited ruling expected on the merits of the preliminary injunction. FinCEN has not yet issued a statement, but it is anticipated that it will comply with the injunction, while continuing to accept filings on a voluntary basis while the litigation is ongoing.

In light of ongoing uncertainty, we recommend that entities that have not yet filed be prepared to file on short notice if the preliminary injunction is once again stayed or overturned, resulting in the January 13 deadline being reinstated or a new deadline being imposed on short notice. As noted by FinCEN, entities may file notwithstanding the injunction if they choose to do so, and entities may wish to complete the filing so that they do not need to monitor the situation and to avoid high traffic to the filing website in the event a deadline is reimposed.

Separately from the preliminary injunction, which is a temporary suspension of enforcement of the requirement to file, resolution of the primary court case could take time. Please note that if you file or have already filed and the law is ultimately found unconstitutional or otherwise overturned or rescinded, you will not be under any continuing obligation regarding that filing.

Entities can of course choose not to file. However, be aware that in addition to the potential need to file on short notice should the preliminary injunction be limited, stayed, or overturned, financial institutions may inquire as to whether the entity has filed a CTA and could require filing as part of the financial institution’s anti-money laundering program.

[LetMyPeopleVote]

7. FinCEN Updates: Alert on Impact of Ongoing Litigation -Deadline Stay- Voluntary Submission Only of Beneficial Ownership

I am on the FinCen email list. Here is the latest email

Alert [December 27, 2024]: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines. On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.

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[LetMyPeopleVote]

8. US Asks Supreme Court to Unblock Corporate Transparency Act

The Department of the Treasury and the DOJ are not giving up on enforcing the Corporate Transparency Act during 2025

Link to tweet

https://news.bloomberglaw.com/litigation/us-asks-supreme-court-to-unblock-corporate-transparency-act

The US Department of Justice asked the US Supreme Court to halt a nationwide injunction against the Corporate Transparency Act, a move that would allow enforcement of the anti-money laundering law during an appeal.

The US said the lower court injunction should be stayed since the high court traditionally applies a strong presumption in favor of allowing challenged acts of Congress to remain pending a final review, according to the application filed Tuesday.

The federal government is challenging a Dec. 3 injunction by a federal judge in Texas, who found that passing the anti-money laundering law overstepped Congress’ constitutional authority under the Commerce Clause. While a Fifth Circuit panel initially ruled in the government’s favor to allow the law’s reporting requirements, a second panel stepped in Dec. 26 to re-block enforcement.

The CTA would require roughly 32.6 million existing business entities to disclose their beneficial owners to the US Treasury Department, a requirement intended to crack down on illegal economic activity. But the district court ruled that the Commerce Clause can’t be leveraged to compel the disclosure of information for law enforcement purposes.

The back-and-forth rulings have added significant uncertainty to the holidays for corporate compliance officials, who started the month facing a Jan. 1 filing deadline that was frozen, then unfrozen, then pushed back a few weeks by Treasury, then re-blocked.