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The Green Light is Back on for the Corporate Transparency Act

New York City

Corporate Transparency Act, beneficial ownership information, co-op and condo boards, llc's.
Jan. 24, 2025

It's understandable if co-op and condo boards are suffering from whiplash — with a generous dose of deja vu — from the ever-changing court rulings on the Corporate Transparency Act (CTA).

The latest head-snapping change came on Jan. 23, when the U.S. Supreme Court issued a stay of an earlier injunction, meaning that the law is back in effect. Though no filing deadline has yet been set, co-op and condo boards are advised to begin collecting beneficial ownership information on all board members because the window for submitting the data is likely to be tight.

This latest reversal by the courts does not address the question at the heart of all this legal wrangling: Is the CTA constitutional?

"The only issue that has been decided is whether FinCEN (the Financial Crimes Enforcement Network of the U.S. Treasury Department) can enforce the law while the challenge works its way through the courts," says Mark Silverstein, a partner at the law firm Schwartz Sladkus Reich Greenberg Altas. "And that may still be a long way off as the lower courts reach their determinations, which will certainly be appealed."

Confused? You're not alone. A bit of history might clear things. As originally written, the CTA required more than 32 million businesses, including co-op and some condo board directors, to submit beneficial ownership information to the Treasury Department by Jan. 1, 2025. (“Beneficial owners” are defined as people who ultimately own 25% or more of the company, or exercise significant control over it.) The law was intended to bring greater transparency to limited liability companies in an effort to combat money laundering, fraud and tax evasion.

But in December, just weeks before the law was to go into effect, a Texas court issued a nationwide injunction against enforcement of the law, finding that the government was unable to provide “any tenable theory that the CTA falls within Congress’s power” — and is therefore likely to be found unconstitutional. The Texas judge called the law "quasi-Orwellian."

Two days before Christmas, the Fifth Circuit Court of Appeals reversed the decision by the Texas judge, meaning the law was back in effect. Three days later, the appeals court reversed itself, reinstating the injunction and effectively blocking enforcement of the law. And now the U.S. Supreme Court has issued a stay of that injunction, and the law is back in effect.

Of course, this is not the last word. As the law firm Smith Buss & Jacobs states in a newsletter: "The appeal process could take several months."

That doesn't mean that co-op and condo boards can relax. Silverstein, the attorney, advises: "Any reporting company that has yet to make its initial filing should be collecting the (beneficial ownership) information necessary to make a prompt filing since any extended deadline will likely be of short duration."

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