Author: Dean Smith (PhD, CFP, TEP, CPA, CA, RWM; Partner)
US Tax Trends
U.S. Corporate Transparency Act (CTA) — An Update
On December 3rd, 2024, the U.S. District Court for the East District of Texas, in Texas Top Cop Shop Inc., et al v. Garland, et al, Case No. 4:24-cv-478 (E.D. Tex.), issued a nationwide preliminary injunction temporarily blocking enforcement of FinCEN’s Corporate Transparency Act (CTA) and its associated reporting rules.
As such, this ruling effectively halts the requirement for reporting companies to disclose information related to their beneficial owners.
Prior to this ruling, affected corporations (both U.S. domestic and foreign entities) were required to comply with the January 1, 2025, reporting deadline. Cadesky U.S. Tax Ltd. had issued a US Tax Tip on October 18, 2024 (can we provide LINK here?)
The Court ruled that Congress exceeded its legislative powers when it enacted the CTA, which the Court characterized as “quasi-Orwellian”.
As of the time of publication, the government has not responded to this ruling. We would expect that the government would appeal the ruling to the Fifth Circuit Court of Appeals. It is possible, that a further appeal could be made to the U.S. Supreme Court. It is also possible that both Congress and FinCEN may take additional action before the end of the year.
What to do?
If the injunction is overturned on appeal, businesses would be required to comply quickly to meet the reporting requirements. As such we recommend that affected companies should continue to gather the required information to fulfill their filing obligations. Cadesky U.S. Tax Ltd. can assist with this process should you need assistance.
