The U.S. Treasury released guidance regarding significant curtailment in enforcement on the Corporate Transparency Act (CTA) on March 2.
The New CTA Updates Include the Following:
The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.
The notice further reported that Treasury will “be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.”
Accordingly, most reporting entities will be spared from filing reports for the foreseeable future. Please note, though, that the CTA remains in federal law until Congress passes and enacts a bill that repeals it. By not repealing the law itself, Congress could allow the current administration (however unlikely) or a future administration the ability to reconsider the administrative rule and revive the filing requirement somewhere down the road.
Regarding the prospect for legislation, U.S. Senator Tommy Tuberville (R-Ala.) has introduced the Repealing Big Brother Overreach Act, a bill designed to overturn CTA, with Congressman Warren Davidson (R-Ohio) likewise introducing companion legislation in the U.S. House of Representatives. Neither bill has progressed past the introductory phase of the legislative process.
While this is generally good news, apparently there will be some businesses that will need to file reports once rules are updated yet again, so many companies still need to continue to monitor developments in this area.
As a reminder, any reporting requirements under FinCEN are not tax filings under the Internal Revenue Code. Accordingly, we continue to encourage you to consult with your legal counsel for additional information and filing requirements regarding beneficial owner reporting obligations.
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