Notable Developments
- Government digs in
- Vivek blasts CTA
- Congress working on delay
- CNBC highlights CTA “awareness” gap
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Legal Update
Just two days after the U.S. District Court for the Eastern District of Texas issued a nationwide injunction of the CTA, the federal government appealed the decision. The case now heads to the Fifth Circuit Court of Appeals, though no word yet on when we might see a ruling.
As noted earlier, the ongoing legal battle – which will likely bleed into 2025 – makes it even more critical that an official delay be enacted. Without one, we could see an outcome where the injunction is halted next year, meaning the tens of millions of entities that did not file due to the injunction would then be out of compliance. That’s the last thing Main Street businesses want looming over their head.
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Regulatory Update
Vivek Ramaswamy, who has been tapped by President-elect Donald Trump to help lead a new Department of Government Efficiency (DOGE), took to X.com yesterday to call out the CTA’s reporting requirements:
Two-point-four million views! Slightly more than the S-Corp feed gets. Vivek is the latest incoming Trump official highlight this regulatory trainwreck, further suggesting the Trump administration will help us to repeal, or at the very least modify, the CTA once in office.
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Legislative Update
Fresh on the heels of last week’s favorable court ruling, several House members signed a letter once again urging FinCEN to implement a delay, as well as clear guidance to affected entities. It reads, in part:
While Judge Mazzant’s ruling provides temporary relief by staying the compliance deadline, it has also introduced significant ambiguity for businesses attempting to comply with the CTA’s requirements. The court’s finding that the CTA and its reporting rule are likely unconstitutional underscores the need for FinCEN to reconsider its enforcement strategy during this period of legal uncertainty. As stewards of public trust, it is imperative that FinCEN provide clear, actionable guidance to ensure small businesses are not unduly burdened or penalized.
Specifically, we urge FinCEN to immediately issue interpretative guidance or a formal public statement clarifying how this injunction affects compliance obligations. Further, we strongly encourage FinCEN to formally delay enforcement of the BOI reporting requirements until the legal challenges to the CTA are resolved and there is greater clarity on the obligations of reporting companies. It is unreasonable to expect small businesses to navigate this uncertainty without fear of penalties for noncompliance.
Even with the nationwide injunction currently in place, it’s critical that a formal delay be implemented through legislative or regulatory action. There are multiple scenarios under which the Texas court ruling could be overturned and Main Street businesses need some semblance of certainty going into next year.
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Media Update
A recent CNBC piece looks at the latest BOI filing data, which shows the massive number of businesses that have yet to submit their required reports:
The federal government had received about 9.5 million filings as of Dec. 1, according to statistics FinCEN provided to the office of Rep. French Hill, R-Ark., who has called for the repeal of the Corporate Transparency Act. Hill’s office provided the data to CNBC. That figure is about 30% of the estimated total.
… The scope of national compliance is “bleak,” the S-Corporation Association of America, a business trade group, said in early October. The “vast majority” of businesses hadn’t yet filed a report, “meaning millions of small business owners and their employees will become de facto felons come that start of 2025,” it said.
Also notable is a quote from FinCEN, which seems to counter the longstanding assertion that only “willful” violations will be prosecuted:
“FinCEN understands this is a new requirement,” FinCEN said in an FAQ. “If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized. However, you could face civil and criminal penalties if you disregard your beneficial ownership information reporting obligations.”
So how is FinCEN going to distinguish between inadvertent and willful violations of millions of non-compliant business owners? Like many aspects of the CTA, it’s hard to say.