Corporate Transparency Act: First Wave of Required Reports Due Starting on March 31, 2024

• 3.26.2024

By: C. S. Avery Reaves and Ben Goldfein

As we have previously reported, the Corporate Transparency Act (“CTA”) is a broad anti-money laundering law intended to assist law enforcement in combating illicit financial activity. The CTA’s beneficial ownership reporting requirements came into effect on January 1, 2024.

Under the CTA, any entity that qualifies as a "Reporting Company"¹ is required to disclose certain information about itself and its “Beneficial Owners” by submitting a beneficial ownership information report (“BOI Report”) to the Financial Crimes Enforcement Network (“FinCEN”), a division of the U.S. Department of the Treasury. If the Reporting Company has been formed on or after January 1, 2024, the Reporting Company must also include certain information about its “Company Applicants” on its initial BOI Report.

Reporting Companies formed or registered to do business in the United States prior to January 1, 2024, have until January 1, 2025, to file their initial BOI Reports. Reporting Companies that are formed or registered in 2024 must file their initial BOI Reports within 90 calendar days of the earlier of (a) the date the Reporting Company receives notice of its creation or registration or (b) the date a secretary of state or similar office provides public notice that the Reporting Company has been created or registered. Reporting Companies formed or registered on or after January 1, 2025, will have only 30 days from actual or public notice of their creation or registration to file their initial BOI Reports. Once a Reporting Company has made its initial filing, it must report any change in required information it has previously provided to FinCEN regarding itself or its Beneficial Owners by filing an additional BOI Report within 30 calendardays of the change.

On March 1, 2024, a U.S. District Court in the Northern District of Alabama, in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), held that the CTA was unconstitutional and permanently enjoined FinCEN from enforcing the CTA against the named plaintiffs. On March 11, 2024, the U.S. Department of Justice appealed the National Small Business United decision to the U.S. Court of Appeals for the Eleventh Circuit on behalf of the Treasury Department.

This ruling and other ongoing challenges to the CTA have increased uncertainty around the validity of the CTA’s beneficial ownership reporting requirements. However, FinCEN has affirmed that all Reporting Companies (other the named plaintiffs in the Alabama litigation) are still required to comply with the requirements of the CTA and should still file their BOI Reports (and any updates) in a timely manner before their applicable deadlines.

The first Reporting Companies subject to the CTA’s reporting requirements—those formed or registered to do business in the United States on January 1, 2024, who are not named plaintiffs in the Alabama litigation—must file their initial BOI Reports by March 31, 2024.

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¹"Reporting Company" is any entity that qualifies as a "domestic reporting company" or a "foreign "reporting company" and, in either case, is not subject to any of the 23 statutory exemptions. A "domestic reporting company" is defined as any corporation, LLC, or other entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Native American tribe. A "foreignreporting company" is defined as any entity formed under the laws of a foreign country and registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. See 31 C.F.R. 1010.380(c).