Corporate Transparency Act (CTA) Declared Unconstitutional in U.S. District Court Case

On March 1, 2024, a U.S. District Court Judge in Alabama held that the CTA, which requires the reporting of beneficial ownership information by businesses, is unconstitutional. What does that mean for clients? For the time being, everything is in flux as it plays out in court. Whether it will be entirely repealed, time will tell. For now, we encourage clients who have yet to file for existing entities created before January 1st, 2024 to hold off until later in 2024 and for clients creating new entities to file within the 90 day compliance window. For more information on the CTA, please see details below.

What is the CTA?
The CTA, part of the National Defense Authorization Act for Fiscal Year 2021, aims to enhance corporate transparency and combat financial crimes, including money laundering and terrorism financing. It mandates certain companies to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
Essentially, certain types of corporations, limited liability companies and other similar entities created in or registered to do business in the United States are to report each entities’ beneficial owners—the persons who ultimately owns or controls the company-to FinCEN. FinCEN’s BOI E-Filing system is currently live and available to submit the information report. 

Key Points You Should Know:

• Who is Affected: Certain types of corporations, limited liability companies (LLCs), and other similar entities will be subject to reporting requirements under the CTA. This includes entities formed or registered to do business in the United States, with exemptions for publicly traded companies, certain financial institutions, and others.
• Beneficial Ownership Reporting: Covered entities must report information on their beneficial owners, including names, dates of birth, addresses, and unique identification numbers such as driver's license or passport numbers. Beneficial owners are individuals who directly or indirectly own or control 25% or more of the entity's ownership interests, as well as individuals exercising substantial control over the entity.
• Compliance Deadlines: Entities already in existence need to report BOI information before December 31st, 2024. New entities need to report BOI information within 90 days of forming.
• Penalties for Non-Compliance: Failure to comply with the CTA could result in significant penalties, including civil and criminal fines and potential imprisonment. 

Where to Get More Information:
If you are looking for further guidance and information on compliance with the CTA, we are happy to have a more in-depth conversation tailored to your individual situation here at Hollow Brook. Alternatively, the official website of FinCEN offers resources, FAQs, and updates related to the Corporate Transparency Act and its implementation. Visit the Beneficial Ownership Information Reporting webpage for information: https://www.fincen.gov/boi

Our team at Hollow Brook is here to assist you in navigating these changes and recommend effective tax strategies tailored to your unique financial situation. If you have any questions or concerns, please don't hesitate to reach out.

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Disclaimer: Information provided is for educational purposes only. HBWM does not provide tax, legal, compliance, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, HBWM makes no warranties with regard to such information, or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.