Tag: Rule

An anti-money laundering law called the Corporate Transparency Act, or CTA, is now back in action after a Dec. 23 court ruling that will require millions of small business owners to register with the Financial Crimes Enforcement Network, or FinCEN, by mid-January, or potentially pay fines of up to $10,000. 

The registration rule had been on hold since Dec. 3, when a federal court in Texas issued a preliminary injunction prohibiting its enforcement. But on Monday, the 5th U.S. Circuit Court of Appeals lifted the order, ruling that the decision is in the “public’s urgent interest in combating financial crime and protecting our country’s national security.”

The CTA requires that the owners and part-owners of an estimated 32.6 million small businesses must register personal information with FinCEN, such as a photo ID and home address, by Jan. 1. With the court ruling that enforcement can proceed, many small business owners may scramble to register ahead of deadline, although FinCEN said on Dec. 23 that it is extending the deadline until Jan. 13 due to the late December court ruling.

“Reporting companies that were created or registered prior to Jan. 1, 2024 have until Jan. 13, 2025 to file their initial beneficial ownership information reports with FinCEN,” the agency said in a statement. “These companies would otherwise have been required to report by Jan. 1, 2025.”

Some business associations say the extension still doesn’t give business owners enough time to meet the deadline.

“We are greatly concerned that a mere two-week extension does not provide enough time for millions of American businesses to comply with the law,” Mark Eisele, president of the National Cattlemen’s Beef Association, wrote to Treasury Secretary Janet Yellen in a Dec. 24 letter. “At minimum, we request Treasury provide a one-year delay to allow for greater education and outreach to small businesses across rural America.”

And some civil liberties groups decried the ruling, saying that the regulation represents governmental overreach.

“The government cannot be allowed to maintain this unconstitutional statute, which stretches beyond Congress’s proper authority to regulate Americans,” said the New Civil Liberties Alliance, a civil rights group, said in a statement emailed to CBS MoneyWatch. 

In an email to CBS MoneyWatch, a FinCEN spokesperson said the appeals court ruling “underscores the importance and urgency of the Corporate Transparency Act for national security.”

“The Corporate Transparency Act levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage,” the spokesperson added.

Here’s what to know about the ruling and the CTA.

What is the Corporate Transparency Act, or CTA?

The CTA, an anti-money laundering statute passed in 2021, was intended to get a look inside shell companies and crack down on attempts by “criminals, organized crime rings, and other illicit actors to hide their identities and launder their money through the financial system,” Treasury Secretary Janet Yellen said in 2022.

The rules first became effective in 2024, but gave existing businesses until Jan.1, 2025, to register, while businesses that began this year have 90 days to register. 

FinCEN is a bureau within the U.S. Department of the Treasury that investigates money laundering and other illegal financial activities. 

What is the CTA’s beneficial ownership information rule, or BOI? 

The reporting rule is the CTA’s Beneficial Ownership Information reporting requirement, or BOI, which mandates small businesses to register the following with FinCEN, according to the U.S. Chamber of Commerce. 

• Your company’s full legal name.
• Its business address (P.O. boxes or lawyers’ offices aren’t accepted, the Chamber of Commerce says). 
• The state where the company was formed or first registered.
• A taxpayer identification number and an identity document, such as a filed Articles of Incorporation.
• Beneficial owners’ full legal names and birth dates.
• Beneficial owners’ home addresses.
• A photocopy of beneficial owners’ U.S. driver’s license or passport.

What is the deadline for registering with FinCEN?

As mentioned above, companies that were created or registered before Jan. 1, 2024 have until Jan. 13 to file their ownership information reports with FinCEN, rather than the original Jan. 1, 2025 deadline. 

Here are other filing deadlines, depending on the date of a business’ creation. 

• Companies created on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 now have until January 13, 2025 to file with FinCEN.

• Businesses created or registered in the U.S. on or after Dec. 3, 2024 and on or before Dec. 23, 2024 have an extra 21 days from their original deadline to file with FinCEN.

• Those businesses that qualify for disaster relief may be have deadlines later than Jan. 13. Those additional deadlines can be found here. 

How do businesses register under the CTA? 

Small businesses can file their beneficial ownership information reports at this link with FinCEN. 

What happens if I don’t register under the CTA? 

The penalties are up to $591 per day for failure to file, according to FinCEN. 

Businesses may also face criminal penalties of up to two years imprisonment and a fine of up to $10,000, the Chamber of Commerce notes. 

Which businesses are exempt from the CTA filing?

There are 23 types of businesses that are exempt from the beneficial ownership information filing, according to the Chamber of Commerce. These include many publicly traded companies and nonprofits, as well as some large operating companies.

Many types of banks and other financial services businesses don’t need to file, according to FinCEN. Some other types of businesses, such as many sole proprietorships, are also exempt, it noted. (A list and Q&A on exemptions can be seen here.)

What may happen next in the CTA case?

It’s unclear, but its possible that groups fighting against the regulation could seek relief from the U.S. Supreme Court or ask for the 5th Circuit for additional review, according to the National Law Review. 

The Associated Press

contributed to this report.