Recent Case History on the Constitutionality of the Corporate Transparency Act

The Corporate Transparency Act has been a subject of significant legal scrutiny and debate. Recent case law has focused on the interpretation and application of the Act, particularly in relation to its requirements for corporate transparency and disclosure. Courts have examined various aspects of the Act, including its impact on corporate entities and the extent to which it aligns with constitutional principles. 

One of the key issues addressed in recent cases is the definition of "person" under the Act, which has been interpreted to include both natural persons and corporate entities. This interpretation has significant implications for the scope of the Act and the obligations it imposes on corporations. The courts have generally upheld the Act's provisions, emphasizing the importance of transparency and accountability in corporate governance.

Fifth Circuit Reinstates January 1 Deadline For Filing BOI report

On December 23, 2024, the Fifth Circuit Court of Appeals issued an order reinstating the January 1, 2025 deadline for filing a Beneficial Ownership Interest (BOI) report as required by the Corporate Transparency Act (CTA). Earlier this month, a federal district court in Texas issued a preliminary injunction indefinitely postponing this deadline. 

In its now overturned opinion, the district court explained why the plaintiffs were likely to succeed in proving the law unconstitutional. In disagreeing, the Fifth Circuit sidestepped privacy concerns and focused only on the inconvenience of filing a BOI report, writing: 

"The harm that a stay would cause the [plaintiffs] is minimal. FinCEN estimated that a typical, simple company would spend about ninety minutes (or about $85 worth of time) to complete and file CTA's required report, which may be filed for free." 

Another hearing at the Fifth Circuit will give the plaintiffs another day in court. However, it's unclear if such a hearing will occur before the deadline. If that fails, the plaintiffs can ask the Supreme Court to intervene. This case and similar cases are likely to find their way to the Supreme Court in the near future. Several members of Congress have authored or co-sponsored bills to overturn the CTA or at least extend the deadline for another year but nothing will come of legislative efforts before the deadline. 

Current Deadline for Filing Reports: An Extension to January 13, 2025

Following the 5th Circuit Decision, the Financial Crime Enforcement Network (FinCen) extended the filing deadline for a BOI report. Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.) It is crucial for reporting companies to ensure that all required reports are prepared and submitted by this date to remain in compliance with the Act.

Conclusion

Understanding the recent case history and the upcoming reporting deadlines is essential for maintaining compliance with the Corporate Transparency Act. If you have any questions or need assistance with compliance, please do not hesitate to contact Glavy Law by email, bud.glavy@glavylaw.com or by telephone, 210-880-1777.