NSBA Sees CTA Filing Obligations Suspended for Now

Re-Published With Permission From Construction News and Review

By Todd McCracken | President & CEO, National Small Business Association

The Corporate Transparency Act (CTA) is an unconstitutional law imposing undue burdens on small business. Under the direction of the U.S. Treasury Dept. and its Financial Crimes Enforcement Network, new businesses formed anytime in 2024 would have had to file beneficial owner information reports, including disclosures of personal information on decision makers of their enterprise, within 90 days of formation. In addition to costly compliance and persistent lack of clarity regarding beneficial owner definitions, the National Small Business Association repeatedly expressed concerns to Treasury and FinCEN about how the CTA justification to stem money laundering and other financial evasions would place undue burdens on small business owners.

NSBA joined more than 150 trade associations in a September 2024 letter to House Speaker Mike Johnson (R), urging delay of the CTA’s year-end
compliance deadline. We met with success.

Yet despite a promise to accept the summary judgment ruling in favor of NSBA’s case against the Treasury and FinCEN, on Dec. 5 the DOJ filed an appeal against the ruling on behalf of the agencies. Fortunately it did not stand.

On December 10, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction blocking enforcement of the act. Before December 10, FinCEN had continued to enforce the CTA against small businesses not named in the lawsuit. This effectively created two classes of small businesses – the roughly 60,000 who were exempt and the tens of millions who would have still had to apply. With larger businesses exempt from BOI filings, NSBA won a lawsuit over the CTA in federal court for its unconstitutional justifications and effects. By this victory for small business, NSBA members who were part of NSBA before March 1, 2024 are currently exempt from CTA compliance requirements, including filingBOI reports. As of now, all businesses are currently exempt from having to file.

And on December 26, the merits panel of the U.S. Court of Appeals for the Fifth Circuit reinstated the nationwide preliminary injunction to block FinCEN from enforcing the CTA. Thankfully, while this preliminary injunction remains in effect, reporting companies are not required to file their beneficial ownership information with FinCEN.

There is legislation (H.R. 9278) pending from Rep. Zach Nunn (R-Iowa) supported by NSBA that would delay the CTA by an additional year.

Although filing under the CTA began at the start of 2024, FinCEN reports it had received just 10 percent of required submissions. This compliance rate can be attributed directly to the general lack of awareness among the small business community when it comes to the new rules. Given this massive education gap, clearly additional time is needed for regulators to continue their outreach to affected small businesses. In enacting the CTA, lawmakers explicitly called for a reporting deadline of “not later than two years after the effective date of the regulations” for existing entities. This timeframe was designed to give affected entities sufficient time to learn of, understand and comply with the new reporting regime, while minimizing the burdens on reporting companies. Acting unilaterally, FinCEN instead promulgated a one-year deadline, an unrealistically short window with which to educate America’s small business community.

NSBA is thankful for the U.S. District Court’s success in blocking the CTA and its requirements and for the Court of Appeals’ preliminary injunction.