Oregon Federal Court Upholds the CTA as Constitutional

In a recent ruling, a federal court upheld the Corporate Transparency Act (CTA) as constitutional, rejecting claims that the law violated several amendments. The plaintiffs, seven individuals, challenged the CTA, arguing that it infringed on their rights to privacy, free speech, and protection against unfair punishment. However, the court found that the law falls within Congress’ authority and is a necessary tool in combating money laundering, terrorism financing, and other financial crimes.

What is the Corporate Transparency Act (CTA)?

The CTA was enacted to combat illicit financial activities and enhance national security by protecting legitimate businesses. Over 30 million corporations, LLCs, and other entities must report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), which is approximately 97% of all businesses registered in the US. This information helps law enforcement and national security agencies identify and prevent illegal financial activities, such as tax fraud and money laundering.

Key Takeaways from the Ruling

The court ruled that the CTA does not violate the Constitution, specifically rejecting claims that it violated rights under the First, Fourth, Fifth, Eighth, Ninth, and Tenth Amendments. The decision means that businesses must comply with the law’s reporting requirements.

Relatedly, several other states still have lawsuits against the CTA in an attempt to deem the new requirement unconstitutional. Despite these efforts, it is unlikely that these appeals will be resolved before the end-of-year deadline. It is also important to note that the District of Columbia, New York, and South Dakota have enacted a similar beneficial ownership reporting requirement at the state level in addition to the BOI requirement implemented at the federal level under the CTA, and at least three more states have legislation in draft. 

Reporting Deadline is Quickly Approaching

With the law upheld, businesses should continue to submit their beneficial ownership filings to FinCEN. Entities should gather the required information on beneficial owners, which includes names, dates of birth, addresses, and identification numbers. Failure to comply with the CTA could result in substantial fines or penalties. Many companies are taking 2-4 months just to gather the necessary information for filing. FinCEN themselves have expressed concern over their system’s capabilities when millions of reports are being filed at the end of the year. 

Solve Your BOI Reporting Requirement

Filing the initial report is only the first step of the reporting process. All BOI must be kept current and accurate, so you must continually be on the lookout for changes in your company’s ownership structure and beneficial owners’ information. To make updates effortless, with Harbor Compliance’s BOI Reporting Service:

1. We send you automated periodic reminders to check if your BOI needs to be updated, so you don’t need to worry about the threat of unreported changes.
2. When any relevant information is changed, we submit an updated BOI on your behalf, sparing you the hassle of doing so independently.

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