On March 1, a federal district court in Alabama found the CTA unconstitutional and enjoined the United States Treasury from enforcing it against the case’s named plaintiffs. In turn, the Treasury filed a notice of appeal and stated that the case impacts only those named plaintiffs.

While the Treasury’s appeal of the Alabama federal district court ruling proceeds, the clock is ticking for entities to either comply with the CTA’s reporting requirements or potentially face stiff penalties.

Under the CTA, entities created before 2024 must file beneficial ownership reports by December 31, 2024, while entities created in or after 2024 have 90 days from creation to file those reports. The beneficial ownership reports provide information on the entities’ underlying individual beneficial owners (including beneficiaries of trusts that own interests in business entities). Failure to file can result in civil penalties of $500 per day up to a maximum of $10,000 and criminal penalties of up to two years in prison.

While the CTA’s reach and the stiff penalties for non-filing can feel daunting, the actual process is not as difficult as many had feared. There is no fee for beneficial ownership reporting, beneficial ownership reports need be done only once (not annually) unless an entity has changes in beneficial ownership, and, for most private business entities with a small number of beneficial owners, the reporting is relatively simple. Reporting can be done at https://www.fincen.gov/boi and generally requires that the person filing the report provide the address, social security number, and a copy of the driver’s license or passport of each beneficial owner.

Therefore, while one can wait and hope that the federal court system will ultimately render the CTA unconstitutional altogether, a more prudent approach would be to proceed with the beneficial ownership filings.

Although we are not preparing CTA beneficial ownership reports for our clients, we are available to answer questions about them.