Notable Developments
- WSJ Highlights Legislative Effort
- Carol Roth on the Need for Certainty
- Is FinCEN Complying with the Injunction?
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Legislative Update
Draft text of a Continuing Resolution – which Congress has to pass before Saturday to avoid a government shutdown – is expected to be released today, and many are watching closely to see if it includes a one-year pause of the CTA.
With the filing requirements currently on hold thanks to a Texas court ruling, why does Main Street still need a delay? Here are Caleb Kruckenberg and Andrew Grossman – who have both helped lead the legal battle against the CTA – with an op-ed in yesterday’s Wall Street Journal:
The burdens are staggering, even by the government’s accounting. FinCEN projects that more than 32 million entities would have to file reports in the first year, with an additional five million in each subsequent year. Compliance costs in the first year alone will be about $22.7 billion, FinCEN estimates. The utter chaos in the run-up to the Jan. 1 filing deadline suggests the real costs may be far higher, as every contractor, gasoline station and homeowners’ association discovered it needed to hire professionals to identify its “beneficial owners” and get the details right. As FinCEN helpfully notes, violations of the reporting requirement may incur civil penalties of up to $591 a day and even criminal penalties.
…Yet the Jan. 1 filing deadline remains a threat. The government has asked the Fifth Circuit Court of Appeals to put the injunction on hold. The government doesn’t dispute that reinstating the filing deadline for this unconstitutional mandate on such short notice would lead to chaos.
The bottom line is that a delay is the only logical conclusion here but it is unclear if the amendment has been included in the CR. As has been the case since Day 1, constituent voices matter most on this issue, so if you’re personally affected by the CTA, we hope you will contact your representatives and support a one-year delay.
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Media Update
Our friend, small business advocate, and ally in the CTA fight Carol Roth has yet another reminder to Congress on the importance of a CTA delay, even in the wake of the favorable court ruling out of Texas. Here’s her op-ed that ran in Fox News the other day:
While this injunction offers small business owners a temporary reprieve against the “beneficial ownership information” (BOI) rule, they need more certainty.
…Congress needs to act to give small businesses clarity. In addition to delay bills in the House and the Senate, a repeal bill “Repealing Big Brother Overreach Act” introduced in the House by Rep. Warren Davidson, R-Ohio, and in the Senate by Sen. Tommy Tuberville, R-Ala., should be voted on by Congress.
Also, the Trump administration has an opportunity to come out and say that it won’t enforce any fines either – giving more clarity to small businesses headed into the end of the year – and, even better, that Trump’s Treasury will jettison this effort entirely.
We couldn’t agree more and hope Congress hears this message loud and clear.
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Legal Update
Attorney Keith Bishop posted an interesting take regarding the Texas court decision to halt the CTA and FinCEN’s decision to continue collecting those filings:
Earlier this month, U.S. District Court Judge Amos L. Mazzant preliminarily enjoined the Corporate Transparency Act and its implementing regulations. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 4953814 (Dec. 03, 2024). Two days later the Department of Justice filed an appeal with the Fifth Circuit Court of Appeals on behalf of the Department of Treasury. At about the same time, the FinCEN (a bureau within the Department of Treasury) issued an alert which included the following (emphasis added):
While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.
I find it interesting that the FinCEN has decided that it can continue to collect filings given Judge Mazzant’s conclusion that the “CTA is likely unconstitutional as outside of Congress’s power”. If Congress had no power to enact the CTA, what power does the FinCEN have to implement it, even on a voluntary basis. What is the authority of the FinCEN to spend money on an unconstitutional program? In the corporate context, this would be characterized as ultra vires on the part of the FinCEN.
As Bishop concludes, if the CTA itself is enjoined, doesn’t that mean that it cannot be applied even on a voluntary basis?