Beneficial Ownership Reporting Blocked Nationwide

What happened: A Texas federal court judge Dec. 3 preliminarily blocked the U.S. Treasury Department’s Corporate Transparency Act (CTA) rule nationwide. The rule would have required certain corporations and LLCs to report information about their beneficial owners to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The ruling came as part of a legal challenge brought by businesses and advocacy groups, who argued that the CTA overstepped federal authority and infringed on state regulatory rights.

Why it matters: The CTA was designed to combat money laundering and other financial crimes by requiring certain small businesses and corporations, including several ARTBA members, to disclose their beneficial ownership to FinCEN. The nationwide injunction means that these businesses no longer need to comply with the rule’s reporting requirements by the upcoming Jan. 1 deadline.

What’s next: The federal government may appeal the preliminary ruling, or wait to litigate the full case. Meanwhile, the Court’s ruling overturns reporting requirements at least temporarily. Prianka Sharma is the contact.