Summary
Under the new March 21 deadline to enforce the Corporate Transparency Act, US businesses that are preparing to disclose their beneficial ownership information to the government may experience an additional delay in the compliance date.
Bloomberg Law
"US businesses preparing to disclose their beneficial ownership information to the government under its new March 21 deadline to enforce the Corporate Transparency Act could see the compliance date pushed back again.
That deadline is when most businesses must file reports identifying who owns or controls their company, directly or indirectly, to the Financial Crimes Enforcement Network. The bureau set the deadline late on Feb. 18 after a court lifted the last remaining nationwide block against the Corporate Transparency Act. Legal challenges repeatedly thwarted the law’s implementation, which had been scheduled to take effect on Jan. 1, 2025.
FinCEN, which sits within the Treasury Department, said in its announcement that it would consider further modifications to the deadline and possibly shrink the pool of companies required to file reports. Finer details about those changes will determine the path forward for a swath of small businesses that haven’t yet made their disclosures, said Jennifer L. Horowitz, chair of Cole Schotz PC’s corporate transactions department.
Future delays and exceptions for low-priority businesses “would be beneficial for everyone involved, including FinCEN, which seems to want more time even within its own self-made deadline,” Horowitz said. “I do think it would behoove everyone to analyze which entities are, in fact, appropriate filing entities, and in which time frame,” Horowitz said.
Politics are also at play, said Bill Kambas, a partner on Withersworldwide’s US private client and tax team. The battle over these reporting requirements has spanned multiple presidential administrations and spurred Republican opposition in Congress and some US states. Congress may yet act to push the deadline until next year.
The CTA’s supporters say the law is designed to combat money laundering, tax evasion, terrorism financing, and other illicit financial schemes by cracking down on the anonymous shell companies used to facilitate those crimes. The law faced pushback in the courts from businesses that called its requirements onerous, over-broad, and in excess of Congress’s constitutional authority over interstate commerce.
According to the announcement, FinCEN will revise its disclosure rule to “reduce burden for lower-risk entities, including many US small businesses,” while prioritizing entities that pose the most significant threats to national security. A FinCEN spokesperson declined to comment on when those revisions would be announced.”
This article was originally published in Bloomberg Law.
