Notable Developments

  • Main Street backs latest delay effort
  • CTA gets high profile callout
  • FinCEN issues updated guidance
  • All-cash homebuyers get BOI treatment

Legislative Update

Following Congressman Zach Nunn’s (R-IA) introduction of the Protect Small Businesses from Excessive Paperwork Act (H.R. 9278) – legislation which would delay the CTA’s reporting requirements by one year – S-Corp joined with more than 150 trade associations to support the bill.

As our post notes, The Nunn bill is in keeping with legislation (H.R. 5119) passed by the House last year in a near-unanimous vote of 420-1. Despite that overwhelming show of support, H.R. 5119 remains stalled in the Senate due to opposition from Banking Committee Chairman Sherrod Brown (D-OH). At this point, Senator Brown is the only thing standing between 30 million small businesses and a one-year reprieve from the CTA’s onerous reporting requirements.

Media Update

Vice Presidential candidate JD Vance called out the CTA last week as part of a thread on X.com. Responding to a position paper released by VP Harris’ campaign, Vance took aim at a section entitled “grow small businesses and invest in entrepreneurs,” writing:

Vice President Harris claims she’ll “take on the everyday obstacles and red tape that can make it harder to grow a small business.”

However, under her administration, the SEC has promulgated at least 47 rulemakings… and we’ve seen Treasury enact burdensome compliance regulations, with some even aimed at small businesses, like the Administration’s preferred implementation of the Corporate Transparency Act.

This doesn’t sound like cutting red tape to me. It sounds like the opposite: enacting overbearing regulations that stifle innovation and kill job creation. [Emphasis added.]

The mention is notable not just because it comes from the presidential ticket, but also for the stark contrast it draws between Vance and his Ohio Senate colleague, Sherrod Brown, who continues to single-handedly block a one-year delay of the CTA’s reporting requirements.

Regulatory Update (Part 1)

On August 29th FinCEN published a final rule requiring additional disclosures of personal information for certain real estate transfers. Here’s JD Supra with an overview:

The Rule will be effective December 1, 2025, and will require a suspicious activity report (a “Real Estate Report”) to be filed with FinCEN under the Bank Secrecy Act (“BSA”) for non-exempt transfers consummated without mortgage or financial institutional financing. The Real Estate Report is more extensive than the Beneficial Ownership Report (“BOIR”) filed under the Corporate Transparency Act (the “CTA”), but will contain some of the information in a BOIR.

Expect to see more reporting rules based at least in part on the CTA in the years to come.

Regulatory Update (Part 2)

On September 10th FinCEN issued updated FAQs regarding short-lived entities and foreign companies. Here’s Accounting Today’s writeup of the changes:

One of the most significant clarifications from this FAQ update pertains to entities that cease to exist shortly after creation or registration — does an entity still have to file if it ceases operation before its reporting deadline? The updated guidance establishes a clear mandate: Regardless of how quickly a company winds up its affairs, it must fulfill BOI reporting obligations.

So given the opportunity to provide relief to the owners of entities that no longer exist, Treasury decided to move in a completely different direction.  On the foreign entity front, Accounting Today observed:

…Addressing a critical gap in understanding for foreign entities operating in the U.S. market, FAQ C.16 is new. While the FAQ only asked whether foreign companies were required to report BOI if they had ceased operations before the BOI effective date of Jan 1, 2024, the guidance addresses when foreign companies are subject to BOI reporting requirements.

The three key points from C.16 regarding foreign entities are:

  • Foreign companies are exempt from BOI reporting if they ceased U.S. operations before Jan 1, 2024;

  • FinCEN considers a foreign company to have ceased U.S. operations when it completes the formal and irrevocable withdrawal of all U.S. registrations; and

  • BOI filing is required for foreign companies registered to do business in the U.S. on or after Jan 1, 2024. Even if they subsequently withdraw registration or had already wound up affairs before that date, they must file a BOI report.

Legal Update

As we outlined in a previous edition, the Eleventh Circuit Court of Appeals announced a hearing in NSBA v Yellen, the case challenging the constitutionality of the CTA, will take place on September 27. While the court is working under an expedited timeline, that date is just three months ahead of the year-end filing deadline for existing entities.

For a solid summary of the NSBA case against the CTA and where it stands, this write-up from the Federalist Society is a must read.  As the article notes:

The government has appealed to the Eleventh Circuit, briefing is complete, and oral argument is set for September 27, 2024, in Birmingham, AL. While that oral argument looms, five other challenges to the CTA’s constitutionality have been filed in federal courts, including in Maine, Texas, and Michigan.

Since the article was drafted, a seventh and eighth case have been filed, this time in Utah and Oregon.  Here are the links:

  • Utah: Taylor v Yellen (7/29/2024)
  • Oregon: Firestone v Yellen (6/27/2024)
  • Massachusetts: BECMA et al v Yellen (5/29/2024)
  • Texas: NFIB et al v Yellen (5/28/2024)
  • Maine: William Boyle v. Yellen (3/15/2024)
  • Michigan: Small Business Association of Michigan et al v. Yellen (3/1/2024)
  • Ohio: Robert J. Gargasz Co., L.P.A. et al v. Yellen (12/29/2023)
  • Alabama (appealed): NSBA et al v. Yellen (11/15/2022)