On December 26, a merits panel of the U.S. Court of Appeals for the Fifth Circuit again halted the implementation of the Corporate Transparency Act’s (CTA) beneficial ownership reporting requirements.
Why it matters: The January filing deadline is on hold for some small businesses to file reports with the Department of the Treasury or risk fines and criminal penalties. Due to litigation developments, the Treasury Department had extended the filing deadline from January 1 to January 13.
What happened: The court's order comes three days after a ruling that had reinstated the filing deadline, reversing a decision in early December by a Texas judge to halt the requirements. Holding that the CTA is likely unconstitutional, the Texas judge issued a preliminary injunction barring the government from enforcing the CTA and its reporting requirements against anyone.
What's next: The appeal is on an expedited schedule, and oral argument will be scheduled soon. The reporting requirements will remain on hold as the court "considers the parties’ weighty substantive arguments".
What is the Corporate Transparency Act?
The CTA was enacted by Congress on January 1, 2021, as part of the National Defense Authorization Act. The CTA included significant reforms to anti-money laundering laws and is intended to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud.
Under the act, small businesses in the United States need to file beneficial ownership information reports (BOIR) with the Department of the Treasury by January 1.
Failure to submit the new paperwork by the deadline puts small business owners at risk of criminal penalties, imprisonment, and fines up to $10,000.
Our guide has full details on the CTA.
