Most Recent CTA News December 27, 2024
Fifth District of the Court of Appeals Reverses Itself - Reinstates Injunction
On December 26, 2024, in a shock to the legal community, the Fifth District of the Court of Appeals has vacated its ruling that stayed the injunction against enforcement of the Corporate Transparency Act. The Order is quite simple, stating:
In order to preserve the constitutional status quo while the merits panel considers the parties' weighty substantive arguments, that part of the motions-panel order granting the Government's motion to stay the district court's preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.
This means that the injunction once again prohibits the government from enforcing the CTA against businesses throughout the nation. Businesses of all types that would have otherwise had to file BOIR forms will not currently have to comply with the CTA.
The Plaintiffs in the underlying lawsuit who sought and won the preliminary injunction, filed a motion for expedited ruling for rehearing en banc. This is a request for a new hearing before all of the judges of the Fifth District Court of Appeals instead of just the three judge panel the case was assigned to. The current briefing schedule on the Motion is as follows:
The Government has until February 7, 2025 to file a brief in support of their appeal and the lifting of the injunction.
The Plaintiffs will have until February 21, 2025 to file a response brief in support of the District Court's Order.
The Government will have the right to file a reply brief on or before February 28, 2025.
The motion is scheduled for a hearing on March 25, 2025.
As the back and forth nature of the injunction shows, this issue remains very fluid. We do not recommend that our clients file their BOIR reports at the moment. However, they should be prepared to do so should the injunction be lifted once again. Board members, decision-makers and individuals holding twenty-five percent interest in a business will need to provide a current name, address, birth date and an identifying document (a drivers license or passport). Businesses should begin collecting this information so that they can comply should the worst happen and the injunction is lifted.
Past CTA Updates
December 24, 2024: Filing deadline extended to January 13, 2024
December 23, 2024: Stay in place preventing enforcement of the injunction - Resume Filing
December 4th, 2024: Preliminary Injunction Filed - Hold off on Filing
Corporate Transparency Act Information
The Corporate Transparency Act (CTA) went into effect January 1, 2024. This law requires that certain business, including small business, to file information with the federal government - U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
The law’s purpose is to increase business transparency to prevent illegal activities like fraud, money laundering and tax evasion.
Who Does This apply to?
The CTA applies to all businesses that are registered with the state unless there is an exemption. Currently there are 23 types of entities that exempt from filing. One of those exemptions are for “tax exempt entities”. There is discussion by CPA’s as to whether an Association is “Tax exempt” if they file an 1120-H.
What has to be provided?
The association has to make an initial filing including the following information
Name
Address
Phone Number
Tax ID Number
Other contact information for the association.
It is also necessary for providing additional information about the President, and most likely every Board member of the association. Information required:
Name
Address
Date of Birth
Identifying documents (drivers license or passport)
The association must file a change of information within 30 days of any changes to the original information occurs. This means that within 30 days of any change in the board, the association will need to file a revised filing with FinCen.
When does this have to be done?
The Corporate Transparency Act takes effect on January 1, 2024, however, the deadline to submit any necessary documents is January 1, 2025. Any changes in the association will also require a revision with 30 days.
What if we do not file?
Assuming that the law does not change, the Association can be fined up to $500.00 per day if information is not properly filed. There is also a risk of criminal penalties and senior officers of entities that fail to file could be held accountable for not filing.
What should the Associations do right now?
Associations are advised to consult with their attorney to start preparations immediately. By doing so, community associations can avoid large fines.
What are the attorneys doing?
It looks like the attorneys may be the ones filing this on behalf of clients, similar to annual reports.
Right now the biggest concern is how to protect the personal information of clients. Our portal allows our clients to upload a copy of their drivers license or passport in an encrypted format.
Legal assistance from CCP
Contact our law firm if you have questions regarding the Corporate Transparency Act and the impact it may have on your association.
Cervantes Chatt and Prince can assist in understanding the CTA requirements and how to file.
You can reach CCP by calling 630.326.4930 or at ccpchicago.com. Request a free consultation!
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