On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that the Corporate Transparency Act’s (CTA) beneficial ownership reporting requirements were unconstitutional, citing Congressional overreach. The court determined that the plaintiffs in the case, Isaac Wilkes and National Small Business United (NSBU) which represents 65,000 members including Wilkes, will not be subject to these requirements.
On March 4, 2024, the Financial Crimes Enforcement Network (FinCEN), who is responsible for enforcing the rules, announced it would comply with this order.
The CTA went into effect on Jan. 1, 2024, aiming to increase transparency in the ownership of certain business entities in an effort to curb financial crimes such as money laundering and tax fraud. It requires business entities, including corporations and LLCs, operating within the United States to submit information about the entity, its owners, and who controls the entity by filing a beneficial ownership information report with FinCEN. There are multiple exemptions to these filings that all legal entities will need to examine to determine their obligation to report.
Aldrich Insights
- While enforcement has been halted for NSBU members, entities who are not part of that organization are still required to file.
- This is an evolving situation with additional lawsuits and rulings expected, and companies should consider continuing to monitor developments but hold off on filing until closer to the end of calendar year 2024.
- Companies created or registered before Jan. 1, 2024, must file initial beneficial ownership information by Jan. 1, 2025.
- Companies created or registered on or after Jan. 1, 2024, and before Jan. 1, 2025, will have 90 calendar days to file.
- Companies created or registered after Jan. 1, 2025, will have 30 calendar days.
We recommend consulting with your lawyer to determine the best time to report as well as which entities and individuals to include in the report—there are several exemptions.
