Big news for S corporations and other businesses covered by the Corporate Transparency Act – draft text of the negotiated legislation, which was released earlier today, includes a one-year delay of the Corporate Transparency Act’s (CTA) reporting requirements.
That means many businesses covered by the CTA – specifically those that existed prior to 2024 – will have an extra year to file their Beneficial Ownership Information reports. It’s a commonsense approach that S-Corp and its allies have pushed for over the last several years and, if enacted this week, will give 30 million businesses some much needed certainty heading into the New Year.
As we wrote earlier this week, a legislated delay is important even in the wake of a favorable ruling out of Texas imposing a nationwide injunction on CTA filing. That injunction is being appealed, and the Fifth Circuit has approved a dramatically accelerated timeline and appears to be gearing up to issue a verdict before year end. S-Corp is joining the Private Investor Coalition to submit an Amicus brief this week.
So the belt-and-suspenders approach is needed here.
The legislated delay is by no means a done deal – Speaker Mike Johnson faces an uphill battle getting the CR bill across the finish line, so the text released today could change as concessions are made to secure votes. Meanwhile, the Fifth Circuit could rule in the government’s favor and stay the nationwide injunction, forcing millions of covered businesses to file in the few remaining days of the year. As the WSJ noted this morning:
The Fifth Circuit could throw out the CTA on grounds Judge Mazzant lays out, but other courts are split. A federal judge in Alabama has ruled the CTA unconstitutional, while federal judges in Oregon and Virginia made preliminary rulings going the other way. The cases could go to the Supreme Court.
But Congress needn’t wait for courts to remove this looming burden from millions of small businesses. This is the kind of unnecessary regulation that Republicans campaigned to stop. A one-year delay is already under consideration as an amendment to the year-end spending bill being debated in Congress. Congress can adopt this amendment, deliver relief to small business, and give the courts the time they need to resolve this mess.
Our view is the injunction will remain in place and Congress will succeed in passing its spending bill, including the 1-year CTA delay, but we will just have to wait and see. The good news is there’s still time in the calendar for covered businesses to pause their filing and see where Congress and Courts end up. If all goes well, it’s going to be a very happy New Year indeed.