Many of you have (or should have) heard of the Corporate Transparency Act. What has become a “naughty word” in many circles, the CTA was enacted in 2021 as part of the National Defense Authorization Act, aimed to combat money laundering, terrorist financing and other illicit activities by requiring businesses, including many farm operations, to disclose their “beneficial owners” to the Financial Crimes Enforcement Network.
However, recent court decisions have thrown the enforcement of this act into disarray, affecting how farm businesses manage their reporting compliance obligations.
The CTA initially set out a phased implementation where businesses formed or registered before Jan. 1, 2024, had until Jan. 1, 2025, to file the dreaded “beneficial ownership information” with the government. But the waters have been muddied by a series of judicial rulings.
In March, a federal judge in Alabama declared the CTA unconstitutional, permanently blocking its enforcement against the National Small Business Association and its member-businesses. However, this ruling was limited to the parties of that case, leaving most businesses, including many in agriculture, still required to comply with the CTA’s mandates.
Thus, throughout much of 2024, many businesses complied with the CTA’s reporting requirements in earnest. Then, like an early Christmas surprise, in December, a federal judge in Texas issued a nationwide preliminary injunction halting the enforcement of the CTA and suspending its reporting deadlines for all businesses in the U.S. This decision was significant, as it paused the Jan. 1, 2025, reporting deadline for existing entities.
But what the courts give, they can equally take. On Dec. 23, a federal appeals court stayed the lower court’s injunction, reinstating the CTA and its reporting requirements, giving businesses a two-week reprieve until Jan. 13 for filings. This move caused many businesses to scramble to get their filings completed during the Christmas holiday.
However, in an unorthodox turn of events, on Dec. 26, the very same federal appeals court reversed its decision, reinstating the nationwide injunction against the CTA. As a result, no filings were required, and the law’s enforcement was again put on hold.
Planning challenges
As of writing this column, the CTA remains unenforced due to this preliminary injunction, and no action is required. However, it is possible that the injunction could be lifted, and compliance may be immediately required.
For farmers, who often operate through limited liability companies or corporations, this legal uncertainty poses significant planning challenges. The back and forth in court rulings means that while there’s no current obligation to file, being prepared for a potential quick reinstatement of the CTA is crucial.
The saga of the CTA’s enforcement continues to unfold, and I urge my clients in agriculture to monitor developments closely with an eye toward readiness. The agricultural sector, like many others, is caught in the crosshairs of this legislative and judicial tug-of-war, highlighting the importance of legal guidance in navigating these turbulent waters.