FinCEN Suspends Reporting Requirements as Circuits Grapple With Corporate Transparency Act’s Constitutionality
The Corporate Transparency Act (CTA) and its implementing regulations (Regulations) require entities within its scope (reporting companies) to disclose information, including about their beneficial owners, to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The Regulations set a reporting deadline of January 1, 2025, for initial reports to be filed by reporting companies formed […]
Shay Dvoretzky, Parker Rider-Longmaid, and Amy E. Heller are Partners at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden memorandum by Mr. Dvoretzky, Mr. Rider-Longmaid, Ms. Heller, Adam J. Cohen, Jeremy Patashnik, and Nicole Welindt.
The Corporate Transparency Act (CTA) and its implementing regulations (Regulations) require entities within its scope (reporting companies) to disclose information, including about their beneficial owners, to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The Regulations set a reporting deadline of January 1, 2025, for initial reports to be filed by reporting companies formed before 2024 and require reporting companies formed beginning in 2024 to file within specified time periods following their formation (within 90 days for entities formed during 2024 and within 30 days for entities formed after 2024).
But plaintiffs throughout the country have challenged the CTA’s constitutionality, arguing, among other things, that the law exceeds Congress’s power under the Commerce Clause. In the most significant development, the district court in Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-478 (E.D. Tex. Dec. 3, 2024), found the CTA and Regulations likely unconstitutional and issued a nationwide preliminary injunction halting enforcement of the CTA and Regulations and their reporting requirements. According to FinCEN, the result is that “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the [injunction] remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership reports.”
