Advocacy News – Jan. 24, 2025
What’s happening: In yet another turn of events, the US Supreme Court on Thursday put the Corporate Transparency Act (CTA) back on the books. However, because a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) remains in place, companies (for now) will escape the burden of having to immediately file beneficial ownership information and will not be subject to liability if they fail to file this information.
The big picture: The CTA has been subject to a myriad of legal challenges since it was passed by Congress in 2021. It was intended to make new ownership disclosures in an effort to combat financial crime
- A Texas judge issued a nationwide pause on the Corporate Transparency Act in December after finding that the financial transparency law was likely unconstitutional. The Biden administration then asked SCOTUS to overturn the lower court’s order, arguing that Congress was within its Commerce Clause authority to regulate economic activities impacting interstate commerce. The Court granted the government’s request Thursday – refusing to block enforcement – but did not explain its decision.
Why it matters: The CTA mandates that companies disclose and regularly update detailed beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). It subjects covered entities and their “beneficial owners” to vague and complex reporting requirements while putting their sensitive personal information at risk. Failure to comply can result in fines of over $590 per day, as well as felony charges and up to two years imprisonment.
- FinCEN estimates that more than 32 million entities will be affected by the new law just this year, with an additional 6 million each subsequent year as new businesses are formed. Yet as of December 1, 2024 – just one month before the year-end deadline (which ended up being paused) – FinCEN has received less than 30 percent of the required filings, highlighting the stark education gap when it comes to the compliance obligations mandated by the CTA.
- The CTA impacts domestic reporting companies, including LLCs, corporations, and other entities formed through filing with a secretary of state or a comparable office in the U.S., as well as foreign reporting companies that are registered to conduct business in the United States through filing with a secretary of state or an equivalent office.
What now: Businesses should continue to monitor this situation closely and consult with their tax attorney or tax preparer. It’s possible that the courts could pave a path for the government to move ahead with enforcement of the CTA. It’s equally possible that the courts could overturn it or that Congress could act to repeal it.
What the MI Chamber is doing: Prior to this week’s turn of events, the Michigan Chamber had already joined forces with business groups across the country to call on Congress to pass a one-year delay of the law’s compliance deadline. In the last few weeks, the conversation has shifted to a possible repeal, with U.S. Senators Rand Paul (R-KY) and Tommy Tuberville (R-AL) introducing the Repealing Big Brother Overreach Act to repeal the Corporate Transparency Act (CTA) and protect small businesses.
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We are closely monitoring this issue and continue to call upon Michigan’s Congressional delegation to work toward a reasonable solution and avoid costly unintended consequences for our state’s small business owners.
Go deeper: Access the U.S. Chamber’s Small Business Guide to Complying with the CTA. Contact the MI Chamber team with questions.