The Tax Moves Blog

In December 2024, the Fifth Circuit Court of Appeals temporarily suspended the requirement for companies to submit beneficial ownership information, allowing reporting companies to stop complying with this requirement until the Texas Top Cop Shop, Inc. v. Garland case is resolved. As a result, reporting companies are not currently obligated to submit beneficial ownership information to FinCEN. However, companies may still choose to voluntarily submit this information if they wish.

This ruling is significant because it affected many companies that had already prepared to comply with CTA requirements. Although the suspension is only valid as long as the court order remains in place, businesses should be aware that they may be required to comply again if the appeal is resolved in favor of the federal government.

• Temporary Suspension: While the court order remains in effect, businesses are not subject to penalties for failing to comply with CTA requirements. However, they must remain alert to legal developments, as the suspension could be lifted at any time.

• Voluntary Reporting of Ownership Information: Although not mandatory, companies may choose to continue submitting beneficial ownership reports. This proactive approach could demonstrate the company’s commitment to transparency and the fight against financial crime, which may be favorable in the long run.

• Preparation for Changes in 2025: Despite the temporary suspension, accountants should advise their clients to prepare for a possible return of CTA obligations in 2025. Companies that have not yet adjusted to previous regulations should be prepared to comply quickly and efficiently if the courts rule in favor of the government.

The Texas Top Cop Shop, Inc. v. Garland case is not the only legal challenge to the CTA. There are other similar cases in various courts that could influence the implementation of the law. For example:

• Isaac Winkles v. Department of the Treasury: A court in Alabama ruled in favor of the plaintiffs, blocking the application of the CTA against them, leading the government to appeal.

• Firestone v. Yellen: In Oregon, another court ruled that the CTA did not violate the Constitution and did not suspend its application, reflecting the government’s continued support for the law.

These rulings reflect the volatile legal landscape surrounding the CTA, requiring accountants and CPAs to stay informed and ready to adapt to any changes as the litigations unfold

Given the ongoing litigation and uncertainty surrounding the CTA, accountants and CPAs should take a proactive approach to advise their clients. Key strategies include:

Monitoring Legal Developments: Staying informed about the court decisions regarding the CTA is crucial for anticipating how changes might affect businesses and their reporting obligations.

Ongoing Compliance Advice: Although submitting beneficial ownership information is not mandatory during the suspension, accountants should prepare their clients to comply once the requirements are re-enacted.

Preparation for 2025: Businesses should have the necessary systems in place to comply with the law in 2025, especially if the government’s appeal is successful. This includes collecting and maintaining accurate beneficial ownership information.