Without regurgitating all the reporting obligations and consequences (well detailed in those prior communications), there are plenty of headaches in them. We had been advising our clients who have non-exempt entities formed prior to January 1, 2024 to wait until much closer to January 1, 2025 (when their reporting obligations kick in) because of the possibility that someone (Congress?) would realize just how much bureaucratic burden they had created in enacting the regulation, but the ruling in Alabama could mean that the courts will beat them to the punch.
The ruling holds that, while the aims of the Congressional intent of the legislation—to prevent individuals from standing behind shell entities involved in financial crimes like tax evasion and money laundering—may be well intentioned, Congress overstepped the boundaries of its ability to regulate commerce, oversee foreign affairs, and impose taxes and related regulation by enacting a law that “lacks sufficient nexus” to any enumerated power to be a necessary or proper means of achieving the policy goals of Congress.
This is undoubtedly not the end of this battle. An appeal by the government is likely and there are an estimated over 32 million entities that are impacted by CTA reporting obligations. For those forming new entities in 2024, barring further developments, you still need to comply with the reporting obligations of the CTA (within 90 days of formation, so if you formed a new entity early this year that deadline is fast approaching). For those with existing entities, stay tuned for more updates.
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