According to the Financial Crimes Enforcement Network (FinCEN), small businesses do not need to file beneficial ownership reports despite a recent U.S. Supreme Court ruling lifting a lower court injunction blocking the reporting requirement, according to a federal agency.
This is because a separate court injunction halting enforcement of the law remains in effect, FinCEN announced on Jan. 24. This announcement by FinCEN was issued after the Supreme Court voted 8–1 on Jan. 23 to lift a Dec. 5, 2024, nationwide preliminary injunction issued by Judge Amos Mazzant.
FinCEN, an agency inside the U.S. Treasury Department, said the CTA is still blocked because Judge Jeremy Kernodle enjoined the law.
Kernodle, also of the U.S. District Court for the Eastern District of Texas, issued a nationwide preliminary injunction on Jan. 7.
In his order, Kernodle wrote that the plaintiffs in the case were “likely to succeed on the merits of their claim that the CTA and its implementing rule are unconstitutional.” The case was Smith v. U.S. Department of the Treasury.
FinCEN said in light of Kernodle’s ruling, “reporting companies are not currently required to file beneficial ownership information.”
As previously reported on this blog, the reporting mandate is part of the federal Corporate Transparency Act (CTA), an anti-money laundering law that required millions of business entities to file information returns about their owners by Jan. 1 or face stiff fines. Because tax evasion and money laundering are often carried out through shell corporations, this is an effort to make that harder to do.
The statute provides that affected corporate entities must file reports with the federal government about their beneficial owners, which means individuals with substantial control over the entity or who own or control 25 percent of the entity. Entities have to provide the government with the names of their beneficial owners, along with their birthdates, addresses, and pictures of identifying information (such as passport or driver’s license numbers) uploaded to the website.
Under the CTA, an estimated 33 million small businesses face fines of as much as $591 per day should they fail to comply with the new rule. Businesses with upwards of 20 employees, $5 million in annual sales, and a U.S. office qualify for exemptions from CTA reporting requirements basically because the have other documentation that is already being submitted to different agencies.
However, they may continue voluntarily reporting the information, according to FinCEN.