More than 32 million U.S. business owners must comply with the Corporate Transparency Act by filing their beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN). Photo by Tyler Franta on unsplash.com

Nearly 33 million companies in the U.S. may be required to comply with the Corporate Transparency Act, meaning they must file their beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN) by Jan. 1, 2025.

Or do they?

After a Texas company challenged the rule, a federal judge blocked the requirements, reaffirming that decision on Tuesday despite a request for stay by the U.S. Department of Justice.

Here is what FinCEN is advising business owners on its website:

“While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Voluntarily submitting the information is also the advice law firm Baker Manock & Jensen in Fresno is giving its clients. Business owners who don’t follow the regulations can face severe penalties for non-compliance, such as civil penalties up to $500 for each day the violation continues or criminal penalties, including jail time or a fine of up to $10,000.

“If the injunction is lifted, we do not know whether there will be any grace period for making filings or if the January 1, 2025 deadline will remain intact,” wrote Haley M. Georgouses, an associate attorney with Baker Manock & Jensen, in an email. “As such, our office is advising clients to voluntarily make their CTA filings prior to the January 1 deadline to prevent noncompliance in the event the injunction is lifted. At the very least, clients should have their documentation readily available to quickly make their filings should they be required to do so.

There are nearly two dozen types of companies that are exempt from the reporting requirements. These include banks, insurance companies, accounting firms and tax-exempt entities.

Exemptions will be rare, with nearly 97% of legal entities likely to be affected, said Mike Montali, CEO of Harbor Compliance in Pennsylvania.

“One of the initial complexities businesses will encounter in CTA compliance is identifying beneficial owners, particularly in nested, multi-entity structures where ownership shares are often diluted,” he said. “The CTA’s criteria for beneficial ownership, requiring reporting on anyone who owns at least 25% of an entity or has substantial control over its operations, can significantly complicate compliance for organizations with layered ownership.”