Even though the Corporate Transparency Act (CTA) is currently in a state of legal uncertainty, treasurers and compliance officers should still assess whether they are subject to it and prepare to fulfill compliance obligations by filing necessary documents, experts say.

The act, passed in 2021, aims to prevent wrongdoers from using legal entities to hide identities and assets, requiring applicable companies to report basic information about beneficial ownership to the Financial Crimes Enforcement Network (FinCEN). The agency, part of the Treasury Department, enforces the requirements. The act mainly applies to companies with fewer than 20 employees and annual revenue not exceeding $5 million, but according to a report by Legal Dive, a sister publication of Industry Dive, large enterprises may not be exempt if they have U.S. subsidiaries considered separate entities.

The act has been under a cloud since a U.S. federal judge in Alabama ruled it unconstitutional in March, with similar lawsuits subsequently filed in Maine and Michigan, said George May, vice president of small business at Wolters Kluwer.

But he noted that the current federal court ruling in Alabama applies only to the plaintiffs—members of the National Small Business Association. Therefore, May believes companies are better off assuming they may be subject to the new rules.

"Our advice to clients is that this obligation is real and is a law passed with bipartisan support in Congress," May said, noting that consulting firms would never advise clients to miss federal filing deadlines in hopes that a court ruling would relieve them of their legal obligations. "The idea that 'I might be exempt and don't have to turn in my homework' doesn't seem like a wise move," he said.

Similarly, even after the lawsuits, Tom O'Saben, director of tax content and government relations at the National Association of Tax Professionals, also advised businesses and individuals to continue fulfilling filing requirements.

"We've been told that the objections to the filing requirements apply only to the parties that filed the lawsuits, and this should not be seen as a general suspension of the filing requirements. All other parties should continue filing and continue to meet their obligations, regardless of how the cases are progressing, because until we have a resolution, there is no stay in effect," O'Saben said in an interview.

While not all CFOs' organizations are subject to the rule, treasurers and compliance officers should check whether they are covered, O'Saben said. "CFOs should pay attention to this," O'Saben stated.

The core of the act applies to domestic corporations, limited liability companies, and other entities with revenue below the $5 million threshold. If applicable, companies must identify so-called beneficial owners—individuals who directly or indirectly exercise substantial control over the entity, or entities that own or control at least 25% ownership interest in the reporting company.

Through the federal government's FinCEN portal, applicable companies must provide their full legal name; any trade name or "doing business as" name; current U.S. address or the foreign jurisdiction where the entity was formed; and an IRS taxpayer identification number. Most companies must file by January 1, 2025.

O'Saben said the CTA filing itself is relatively simple, but he warned businesses to be wary of vendors that exploit the situation by charging fees to handle filings.

"Compliance is relatively easy," O'Saben said. "But... there are a lot of organizations taking advantage of this fear and charging fees to do it for you."