On December 23, 2024, the 5th U.S. Circuit Court of Appeals lifted a nationwide injunction, allowing the enforcement of the Corporate Transparency Act (CTA). This 2021 law mandates that corporations and limited liability companies disclose their beneficial owners to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
The injunction had been issued by a Texas federal judge on Dec 3, 2024, who deemed the CTA likely unconstitutional. However, the appeals court found that the Department of Justice is likely to succeed in defending the law’s constitutionality. The ruling had been sought by the National Federation of Independent Business and several small businesses ahead of a key Jan. 1 deadline for entities to file initial reports under the law.
In response to the ruling, FinCEN has extended the reporting deadline for businesses created before 2024 to January 13, 2025. Entities are advised to comply promptly to avoid penalties.
The CTA aims to combat money laundering and financial crimes by increasing corporate transparency. Businesses should prepare to meet the reporting requirements to ensure compliance.
