What’s Next for the Corporate Transparency Act? Counsel Club’s Take
With the Texas court’s injunction temporarily blocking enforcement of the Corporate Transparency Act (CTA), businesses are left wondering what happens next. At Counsel Club, we’ve been closely following these developments, and here’s our view on what’s likely to unfold in the months ahead.
The Appeal: FinCEN’s Next Steps
As we anticipated, FinCEN has appealed the Texas court’s decision. While the appeal is pending, the agency is abiding by the federal court’s injunction and has temporarily extended the filing deadline. This approach is typical for federal administrative agencies following court rulings, and we expect this compliance to continue until the injunction is lifted or modified.
Potential Outcomes
We see a few likely scenarios as this case evolves:
1. **Extended Filing Deadline:** The appeal process will likely delay the mandatory filing deadline by several months, providing businesses with more time to prepare.
2. **Amendments to Exemptions:** If the appeal is successful, we anticipate the court may require FinCEN to revise its rules. Specifically, broader exemptions could be introduced to ease the burden on small businesses, many of which are struggling with the CTA’s onerous reporting requirements. Some current disclosure obligations, frankly, may not even be necessary to achieve the law’s intent.
3. **Constitutional Challenges:** Additional constitutional challenges to the CTA are inevitable. These could lead to parts of the act being struck down entirely. A new administration might even intervene to roll back the CTA altogether, which would likely require input from the executive branch and Congress.
4. **State-Level Regulations:** In the event the CTA is struck down or substantially weakened, we believe states will step in to fill the gap. This is already happening—New York, for example, has passed legislation requiring similar beneficial ownership filings. It’s likely that states with robust regulatory frameworks, such as California and Illinois, will follow suit and adopt their own CTA-like requirements, potentially piggybacking on the FinCEN framework.
What This Means for Your Business
If states begin implementing their own versions of the CTA, businesses will need to carefully evaluate their compliance obligations based on where they operate. New York’s law, for instance, may mirror FinCEN’s rules, meaning you’ll need to consider both federal and state requirements when deciding how to proceed.
Our Advice
For now, the injunction has paused mandatory BOI filings, but businesses should stay vigilant. We’ll continue monitoring these developments and provide updates as new regulations emerge. In the meantime, it’s worth checking if your business is subject to filing under the current framework with our **Quick Check Tool**, and deciding whether a voluntary filing makes sense for your situation.
As always, Counsel Club is here to help you navigate these regulatory changes and stay ahead of what’s next. Stay tuned for more updates.
