MORE TAXPAYERS CONTEST CTA REPORTING
April 30th, 2024 – New York, United States

MORE TAXPAYERS CONTEST CTA REPORTING

More Taxpayers Contest CTA Reporting


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American taxpayers in two states are the latest to expand challenges to the U.S. Corporate Transparency Act’s new Beneficial Ownership Information reporting.

A majority owner in two Maine companies has become the latest U.S. taxpayer/business owner to bring constitutional challenge to the Corporate Transparency Act (CTA) and its new requirement that small businesses report identifying information of their owners (BOI).


The main issue: Can the U.S. government interfere with a business arrangement that’s essentially between a private enterprise and American state government?


William Boyle of Maine owns 90% of, among other holdings, two limited liability companies with local real estate. Boyle argues that the CTA is an “unconstitutional usurpation of the states’ power to regulate entity formations.”

Meanwhile, in Ohio the plaintiffs in the pending Gargasz v. Yellen cite a broader array of constitutional rights and seek a nationwide injunction on CTA reporting requirements.

These two cases come on the heels of a federal judge in?the Northern District of Alabama ruling that the CTA is unconstitutional within the confines of plaintiffs in a specific case.

All after only three months since the CTA/BOI requirement kicked in.

What must be reported? ? ? ? ? ? ?

As of Jan. 1, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) requires business entities report BOI.

FinCEN estimates that the rule will impact some 32.6 million companies and will deter money laundering, especially by overseas entities. All domestic and foreign entities formed or registered to do business in the U.S. must file the BOI report unless they meet conditions of exception.

Companies must report contact information on all individuals who own or control at least 25% of the ownership interests of the company. Companies formed before this year have all of 2024 to report; companies formed this year have 90 days to report; companies formed after this year have 30 days to report their BOI.

Failure to report can carry fines of some $600 per day to imprisonment. Yet widespread questions and lack of awareness of the BOI requirement persist a full quarter into 2024.

Most serious challenges so far

In early March, federal Judge Liles C. Burke for the Northern District of Alabama ruled the CTA unconstitutional in National Small Business United, d/b/a the National Small Business Association, et al. v. Yellen, et al.

.“Does the Constitution give Congress the power to regulate those millions of entities and their stakeholders the moment they obtain a formal corporate status from a State?” Burke ruled , adding that the CTA is an unconstitutional exercise of Congress’ powers.

By mid-March, FinCEN announced it would appeal the Alabama decision. “The government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action,” the agency said. “Other than the particular individuals and entities subject to the court’s injunction … reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.”

In the Maine case of William Boyle v. Janet Yellen et al., the plaintiff “objects to being forced to comply with the [Corporate Transparency] Act as an unconstitutional encroachment on the sovereignty of the State of Maine to regulate entity formation,” his complaint states. “Regulation of corporate formation does not fall within any of the enumerated powers of Congress.”

Boyle also contends that “the CTA’s burden will fall substantially and disproportionately on privately owned small businesses and non-commercial organizations, regardless of whether there is any reason to believe that these small businesses and organizations have engaged in any misconduct whatsoever.”

The current Customer Due Diligence Rule accomplishes the goal of the CTA better than the CTA will, Boyle adds, without creating a BOI database “containing personal information about law-abiding reporting companies and their owners who will predominantly be U.S. persons, not the foreign individuals and entities engaging in money laundering and illegal activities that the statute was designed to target.”

(Security of a CTA/BOI database has been a concern almost since the BOI requirement was announced.)


The CTA has also been challenged in Gargasz v. Yellen, in the Northern District of Ohio, in which a licensed attorney and his legal professional association filed a complaint for injunctive and declaratory relief in December 2023. The case is pending.



As is the future of BOI and the CTA. These could be just the first legal challenges to what’s perceived as an administrative burden for small businesses.



Your tax specialist needs to stay on top of this and many other issues of wealth, foreign income and tax enforcement. If we can help, please let us know.


About the Author?

Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high-net-worth families and their advisors.


Alicea has more than 20 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm.

Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.


Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S.


Alicea is fluent in Spanish and has a working knowledge of Portuguese.


Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the Global Referral Network (GRN).


Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA?Forty?Under 40 Award.?She was selected as someone that has notable skills and is visibly making a difference in the accounting profession.


In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth's Powerwomen Awards in the category USA - Woman of the Year - Business Growth (Boutique). In 2023, she continued her winning streak by receiving the Gold award for Company of the Year Female Leadership (Boutique) and the Silver award for Accountancy Firm of the Year at the Magic Circle Awards. Furthermore, Alicea has consistently secured her position in the Global Elite Directory for four consecutive years, being recognized as a Private Client Global Elite Advisor and is currently listed for 2024 as a Non-Legal Adviser. This exclusive directory annually highlights the world's elite lawyers and outstanding wealth advisors serving ultra-high net-worth clients.

Please note: This content is intended for informational purposes only and is not a replacement for professional accounting or tax preparatory services. Consult your own accounting, tax, and legal professionals for advice related to your individual situation. Any copy or reproduction of our presentation is expressly prohibited. Any names or situations have been made up for illustrative purposes — any similarities found in real life are purely coincidental.?

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