Oh BOI, What's Going On?
The Corporate Transparency Act (CTA) has been making waves, especially after the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction last night, questioning the law's constitutionality. While this ruling provides temporary relief, it leaves us in a murky legal landscape. Contrary to some misinformed social media posts, this is not the end.
Earlier today, I had the pleasure of joining Tom Gorczynski, EA, USTCP, for an impromptu webinar on Incite.Tax. If you have not heard about InCite, it is a community of technical tax professionals. I highly recommend this community. Check out this video featuring the founders of InCite for more information.
The Legal Challenge
In the case Texas Top Cop Shop Inc. v. Garland, the court found that the CTA likely exceeds Congress's constitutional powers, effectively halting its enforcement nationwide. This comes on the heels of other legal challenges, with courts divided on the issue. The CTA was enacted to combat tax evasion and money laundering by requiring businesses to report their beneficial owners and those with substantial control to the Financial Crimes Enforcement Network (FinCEN).
For now, this injunction means businesses are not required to comply with the CTA’s reporting requirements. However, this could change as the legal process unfolds, and it’s crucial to stay informed.
My Approach with Clients
As a tax professional, I believe it’s essential for clients to make informed decisions. Here's the approach I’m recommending:
Voluntary Filing: FinCEN is accepting voluntary filings for beneficial ownership information. If you want to avoid any future complications or be proactive, this is an option.
Wait and See: Alternatively, you can wait for the courts to issue a final ruling. I believe the Supreme Court will ultimately decide this. While there is no immediate penalty for holding off, it’s worth noting that this legal uncertainty could stretch on for weeks or months. Keep in mind that a reversal of this decision would likely mean an unchanged deadline, which, if you have multiple BOI reports to file, could be significant work. For those clients who want to wait and see, you may need to consider rush fees. The choice ultimately lies with the client, and our role is to provide the information and guidance so they can make an informed decision.
It’s important to stay informed and prepared. I’ll be keeping a close eye on these developments. As always, if you have questions or comments, please post those.
Upcoming Events:
Next week, December 12th, at 1 PM CDT, I will be teaching a 1-hour webinar for NAEA (National Association of Enrolled Agents) on Corporate Transparency Act: Navigating Beneficial Ownership Reporting. We will discuss the latest news as well. You may sign up here.