Whenever the federal government enacts sweeping new legislation, those potentially affected by the law are often (understandably) eager to monitor its progress. In 2021, federal lawmakers passed the Corporate Transparency Act (CTA). The goal behind the law was to identify those involved in businesses as a means of fighting both money laundering and funding for terrorism.
The Act actually received bipartisan support when making its way through Congress, but now it faces opposition from elsewhere. The CTA theoretically took effect as of January 1st, 2024. Existing businesses have until the beginning of 2025 to submit a report to the Financial Crimes Enforcement Network (FinCEN) identifying the parties that help form the company and those with a beneficial ownership interest (BOI) in the organization.
However, a judge in federal court recently ruled in favor of a business that opposes the reporting requirements of the CTA. Does that mean the law has no impact on other companies?
What happened in federal court?
A federal district judge in the Northern District of Alabama had to hear a case about the CTA could have profound implications for the future of this law. Specifically, the judge in this case ruled that the CTA was unconstitutional.
They asserted in a lengthy ruling that lawmakers exceeded their constitutional authority when they mandated beneficial ownership interest (BOI) reporting. Currently, that court ruling might limit enforcement activity. In fact, some businesses that have not yet submitted BOI reports may choose not to do so unless another court reverses that ruling in the future. The Department of Justice has already appealed.
Complying with changes to the law can help those running businesses ensure their continued legal compliance and financial solvency. Violations of federal business statutes can cost hundreds of dollars a day or lead to large one-time fines. CTA violations in theory could lead to $500 a day in fines or a $10,000 fine depending on the circumstances.
Tracking the implementation of major new business laws may benefit those with an ownership interest in an organization, and those helping to run companies, by helping them ensure compliance with federal business regulations. Those aware of the changes in the law generally have an easier time avoiding violations that could lead to prosecution or sizable financial penalties.
