A Push for a Delay in CTA
Yesterday, AFSA joined other trade groups in encouraging the delay of the Corporate Transparency Act’s (CTA) year-end compliance deadline for existing entities. The letter highlights the vagaries of the reporting requirements, as well as the legal challenges to the CTA which leaves small businesses in limbo. If enacted, this provision would provide much-needed relief to the Main Street business community, enable federal regulators to continue their education and outreach efforts, and allow various legal challenges to make their way through the courts. The letter highlights the vagaries of the reporting requirements, as well as the legal challenges to the CTA which leaves small businesses in limbo.
The CTA mandates that companies disclose and regularly update detailed beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). It subjects covered entities and their “beneficial owners” to vague and complex reporting requirements while putting their sensitive personal information at risk. FinCEN estimates that more than 32 million such entities will be affected by the new law just this year, with an additional 6 million each subsequent year as new businesses are formed.
Yet as of December 1, 2024 – just one month before a year-end deadline – FinCEN has received less than 30 percent of the required filings, highlighting the stark education gap when it comes to the compliance obligations mandated by the CTA. Adding to the confusion are the myriad legal challenges that have been filed throughout the country, and which stand at various stages of the legal process. Notably, a nationwide injunction against the CTA was recently appealed and will be heard by the Fifth Circuit, while an Alabama court ruling that found the CTA unconstitutional is pending appeal in the Eleventh Circuit.
Small businesses find themselves in a precarious position: they are currently under no obligation to file, but a single ruling could reverse that dynamic, leaving them with just days to comply with this burdensome and costly statute. A one-year delay would give time to address these challenges.
December 20th, 2024
