On January 23, the Supreme Court stayed the injunction originating in the case of Texas Top Cop Shop, Inc. v. McHenry that would block enforcement of the Corporate Transparency Act (CTA). Notwithstanding, the most recent guidance from the Financial Crimes Enforcement Network (FinCEN) indicates that companies are not subject to liability if they fail to file required information due to a separate nationwide injunction in the case of Smith v. U.S. Department of the Treasury. Therefore, companies are not currently required to file beneficial ownership information but may continue to voluntarily submit reports.
Background
Previously, Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas issued a nationwide injunction on December 3 which was subsequently lifted by the US Court of Appeals for the Fifth Circuit on December 23 only to be reinstated on December 27. The Supreme Court’s move to stay the injunction returns the argument to the US Court of Appeals for the Fifth Circuit which is scheduled to hear arguments on March 25.
The CTA was passed as part of the Anti-Money Laundering Act of 2020 to establish uniform beneficial ownership information (BOI) reporting requirements for certain types of entities registered to conduct business in the U.S. The BOI reports are filed with the FinCEN and the reporting database is intended to assist FinCEN and other permitted agencies with protecting U.S. financial interests from illicit activity hidden behind shell companies or other complex ownership structures. Click Here to read a Forvis Mazars Insight to learn more about the types of companies impacted by the BOI reporting requirements and the information required to be reported.
Action Items
Please visit the FinCEN website to review the latest guidance provided by the agency as the situation continues to evolve.
The CTA reporting rules are not issued under the Internal Revenue Code; therefore, we recommend reporting companies contact legal counsel for assistance. Professionals at Forvis Mazars are available to assist with general questions and can help direct you to the appropriate available resources.