The FY25 NDAA and Delaying the Corporate Transparency Act (CTA)

Sens. Scott (R-SC) and Lankford (R-OK) offered amendments to the FY25 National Defense Authorization Act (NDAA) to delay the Corporate Transparency Act (CTA)’s filing deadline by one year. Remaining consistent with our message to delay the implementation of the CTA, ASA joined 130 organizations in support of these important amendments.  Although filing under the CTA began at the start of this year, only a few million businesses have registered while an estimated 28 million remaining covered small businesses have yet to file. This is a compliance rate of less than 10 percent and it puts these businesses at risk of large penalties and is largely due to a lack of awareness among business owners regarding the new law.  Both the business community and the Department of Treasury’s FinCEN have gone to great lengths to educate small business owners as to their new obligations, but it is clear additional time is needed. Absent a delay, and given the latest data regarding compliance rates, millions of law-abiding citizens will face steep fines and criminal penalties come the end of this year.

Recent court decisions have added to the confusion and are an additional argument for delay.  In a ruling in March of this year, the United States District Court for the Northern District of Alabama found the CTA exceeded the Constitution’s enumerated powers and is therefore unconstitutional. That case was appealed and will be heard by an appellate court later this year. In the meantime, however, FinCEN continues to enforce the CTA against all small businesses and other entities not named in the lawsuit.

Finally, in enacting the CTA lawmakers explicitly called for a reporting deadline of “not later than 2 years after the effective date of the regulations” for existing entities. This timeframe was designed to give affected entities sufficient time to learn of, understand and comply with the new reporting regime, while minimizing the burdens on reporting companies. In its rulemaking, however, FinCEN shortened this deadline and gave existing entities just one year to comply. That decision is problematic both in its disregard of congressional intent and its practical implications for CTA compliance rates.