Notable Developments
- FinCEN halts CTA enforcement
- S-Corp Advisor in the WSJ
- Our Latest Podcast with CIR Litigation Director
- Delay Bill Reintroduced
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FinCEN Halts CTA Enforcement (Despite SCOTUS Ruling)
Last Friday the Financial Crimes Enforcement Network announced that businesses and covered entities are still not obligated to file under the CTA, so long as the ruling in Smith v. Treasury remains in place. Here’s the alert:
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
That good news came just a day after an unfavorable ruling in the Supreme Court that struck down separate nationwide injunction issued by a Texas court in the Texas Top Cop Shop case. However, a separate ruling in Smith v Treasury – which resulted in a stay of the CTA’s reporting deadline – was unaffected by the SCOTUS decision. Importantly, the Biden administration never appealed the January 7 Smith ruling, so as long as the DOJ under President Trump doesn’t do so, the pause should remain in place.
Finally, we’re closely watching NSBA v Yellen, which remains before the Eleventh Circuit and has a good chance of being heard by the Supreme Court this year. That appellate court heard oral arguments last fall and we expect a ruling to be handed down at any time now.
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S-CORP Advisor in the WSJ
Longtime S-Corp advisor and partner at the Milwaukee-based law firm Meissner Tierney Fischer and Nichols has a great Letter to the Editor that ran in the Wall Street Journal over the weekend. Entitled “Don’t bet on criminals and terrorists to be transparent,” it reads:
In “A Key Tool to Fight Terrorists and Criminals” (Letters, Jan. 10), Nate Sibley notes that the Corporate Transparency Act “is intended to tackle the pervasive use of shell companies.”
One problem: I’m a lawyer and I’ve talked with all my terrorist clients. None intends to comply with the CTA. The utility of the statute, then, depends first on all law-abiding citizens registering their entities—at an aggregate cost of “approximately $22.7 billion in the first year and $5.6 billion in the years after,” according to the Financial Crimes Enforcement Network. FinCEN then must digest this massive haystack of information to identify the needle of unreported scofflaw entities.
Mr. Sibley also notes that “there is no fee and most owners can simply file and forget,” except that they have an obligation to update the information for the rest of their lifetimes. He also assures us that data, which includes photo IDs, are “accessible only to law enforcement agents.” Has he read the papers regarding the Chinese hackers breaching closely guarded government databases? What could go wrong?
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Our Latest Podcast with CIR Litigation Director
S-Corp recently took a break from tax policy on our Talking Taxes in a Truck podcast and chatted with Caleb Kruckenberg, Litigation Director for the Center for Individual Rights. Caleb breaks down the latest rulings out of SCOTUS and the Texas Eastern District, the interplay between cases currently being appealed in the Eleventh and Fifth Circuits, additional challenges that have been filed across the country, and the Trump administration’s response.
For anyone looking for a crash course on how we got here and what to expect, be sure to listen here.
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Delay Bill Reintroduced
Congressman Zach Nunn (R-IA) last week reintroduced his CTA delay bill, following up on his efforts to move similar legislation in the previous session. Notably, the bill enjoys support from an even split of Democrats and Republicans, as well as the backing of House Whip Tom Emmer (R-MN). Information on the bill can be accessed here.
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Legal Update
As a reminder, there are (by our count) eleven cases in various courts across the country challenging the validity of the CTA. Here are the links:
- Alabama (appealed): NSBA et al v. Yellen (11/15/2022)
- Ohio: Robert J. Gargasz Co., L.P.A. et al v. Yellen (12/29/2023)
- Michigan: Small Business Association of Michigan et al v. Yellen (3/1/2024)
- Maine: William Boyle v. Yellen (3/15/2024)
- Texas: NFIB et al v Yellen (5/28/2024)
- Massachusetts: BECMA et al v Yellen (5/29/2024)
- Oregon: Firestone v Yellen (6/27/2024)
- Utah: Taylor v Yellen (7/29/2024)
- Virginia: Community Associations Institute v. Janet Yellen (9/10/2024)
- Texas: Samantha Smith and Robert Means v. Treasury (9/12/2024)
- Texas: Association of American Physicians & Surgeons et al v Yellen (10/28/2024)