CORPORATE TRANSPARENCY DEVELOPMENTS
On February 15, 2024 we previously published a blog post regarding the Corporate Transparency Act (the “CTA”) (original blog). Since our February blog post, there have been certain developments regarding the CTA which could impact the filing requirements going forward.
On March 1, 2024, Judge Liles C. Burke of the U.S. District Court for the Northern District of Alabama held that the CTA was unconstitutional and enjoined enforcement of the CTA against the plaintiffs in the case Nat’l Small Bus. United et al v. Yellen et al, No. 5:22-cv-01448 (N.D. Ala. Mar. 1, 2024). The Court’s decision found that the CTA was not within Congress’s broad powers to regulate commerce and oversee national security as the CTA lacked sufficient nexus to any of Congress’s powers in order to be a “necessary or proper means of achieving Congress’ policy goals”.
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) subsequently issued guidance that the decision issued by the Northern District of Alabama only applies to the plaintiffs in Nat’l Small Bus. United et al v. Yellen et al and that all other reporting companies are still expected to comply with the CTA requirements and deadlines.
On March 11, the Justice Department, on behalf of FinCEN filed a Notice of Appeal regarding Nat’l Small Bus. United et al v. Yellen et al. We anticipate that such appeal when filed will seek a stay of the district court decision while the formal appeal is pending.
Additionally, there is currently another challenge pending in the Northern District of Ohio (Robert J. Gargasz Co., LPA v. Yellen, No. 1:23-cv-02468 (N.D. Ohio Dec. 29, 2023)), which seeks a stay for complying with the CTA for all potential reporting companies, not just the plaintiffs in this particular case.
What does this mean for reporting companies?
Reporting companies that were formed on or after January 1, 2024 should still adhere to the 90-day deadline for filing beneficial owner reports with FinCEN. Reporting companies formed prior to January 1, 2024 should still continue to prepare for and comply with the CTA’s reporting requirements; however, these companies may desire to wait until later in 2024 as the CTA landscape continues to develop.
