Like each of the Terminator and Randy Quaid’s character in Independence Day, the Corporate Transparency Act (the “CTA”) is back. On February 18, the Eastern District of Texas lifted the injunction against enforcement of the CTA in Smith v. U.S. Department of Treasury, reopening the door for FinCEN to require compliance. On February 19, FinCEN did just that, and announced updated required compliance dates.
- For entities whose deadlines were not previously extended due to disaster relief, the new reporting deadline is March 21, 2025.
- Reporting companies that received a previous extension have until the date of that extension, which was not further extended.
- For most companies formed prior to January 1, 2024 that have their principal offices or primary records located in Florida, the deadline is July 1, 2025.
- Certain entities that have a Florida principal office or records located in Florida which were formed in 2024 and had a filing date between September 22, 2024, and January 1, 2025 received a 6 month extension of the required filing date.
FinCEN included the following in its latest announcement regarding the CTA:
Notably, in keeping with Treasury's commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.
FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.
While FinCEN has provided the above welcome intention, filers should move quickly to comply as FinCEN is not obligated to reduce any obligations nor has it committed to making any reduction prior to the end of the 30-day window. As a reminder, Gunster does not file CTA reports except for new entities that Gunster forms.
Which entities are required to report?
Subject to some exceptions, the CTA requires all US legal entities created by the filing of a document with a secretary of state or similar official (such as corporations, limited liability companies, and limited partnerships) (“reporting companies”) to report beneficial ownership information to FinCEN. Non-US legal entities that are qualified or licensed to do business in the US may also be subject to the CTA. The exceptions include, but are not limited to, SEC reporting companies, banks and credit unions, securities broker and dealers, certain large operating businesses, and tax-exempt entities. However, the specifics of some of these definitions are complex, so caution is recommended.
What information must be reported?
Each reporting company must report its name (including any trade names or DBAs), address, jurisdiction of organization, and tax ID number (“EIN”). Notably, an EIN must be obtained prior to filing the CTA report. In addition, the reporting company must report, for each “beneficial owner”, either the beneficial owner’s (1) full legal name, date of birth, and address (and must supply a copy of a government-issued photo ID) or (2) “FinCEN Identifier”. Beneficial owners are the human beings who exercise “substantial control” over the reporting company or who own or control 25% or more of the ownership interests of the reporting company, in both cases after looking through trusts or other entities that own interests in the reporting company.
Will the CTA be repealed?
Despite hopes that Republicans in Congress would repeal the CTA, the most recent legislative proposal from Republicans is a bill to delay the effective date for entities formed before January 1, 2024, to January 1, 2026, but not to repeal the CTA. While previous bills to repeal the CTA have been introduced, they did not garner sufficient support to come to a vote and had no Democratic support. At this point, we do not believe repeal is likely and, even if it occurs, it likely will not occur prior to the filing deadline.
While Congress may consider the fate of the CTA, the courts are also continuing to consider it. While either of Texas Top Cop Shop or Smith may yield a filer-favorable result, we suspect the ultimate outcome will be that the CTA is held to be constitutional based on the Supreme Court’s staying of the injunction in Texas Top Cop Shop. The Texas Top Cop Shop case is still scheduled to be heard and ruled on by the Fifth Circuit.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
About Gunster
Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 12 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Naples, Orlando, Palm Beach, Stuart, Tallahassee, Tampa Bayshore, Tampa Downtown, Vero Beach, and its headquarters in West Palm Beach. With more than 300 attorneys and consultants, and over 290 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com
