One of the newly enacted laws SFBBG has been following closely is the Corporate Transparency Act (the “CTA”), a federal statute that impacts the overwhelming majority of our clients. A discussion of the CTA can be found in our November newsletter.
The CTA went into effect on January 1, 2024 and requires certain corporations, limited liability companies and other similar entities created by a filing with the secretary of state to report beneficial owner information to the Financial Crimes Enforcement Network (FinCEN), the criminal arm of the United States Treasury Department.
The goal of the Act is to encourage corporate accountability and prevent financial crimes such as money laundering and tax evasion.
Last week in National Small Business Association v. Yellen, a federal district court in Alabama upheld a challenge to the CTA finding that the Act is unconstitutional because it exceeded the powers granted to Congress. Since the ruling was issued by a district court and because the court’s own written decision restricted its application to the case before it, the CTA remains otherwise in effect. The decision likely will be appealed.
Notwithstanding the Alabama federal district court’s ruling, we are advising our clients to comply with the Act by making the required disclosures.
Given the breadth of the CTA — which applies to corporate entities formed at the state level across the country with certain exceptions — we expect further court challenges to the Act. We will continue to monitor the evolving legal landscape surrounding the Act.
We are available to assist our clients with their reporting obligations, including determining whether their entities fall into one of the CTA’s exemptions, and further analyzing which stakeholders must be disclosed, if any. Please contact Joan Berg ([email protected]) if you have questions regarding your company’s compliance with the Act, or by calling (312) 648-2300.
