Spoiler Alert: Federal Court Enjoined Implementation and Enforcement!

Additional Spoiler Alert: NY LLC Transparency Act Unaffected (so far)!

The US Federal Corporate Transparency Act (CTA) * was enacted into law in January of 2021, in an effort to bolster the ability of law enforcement and intelligence agencies, as well as financial institutions to be better able to identify and prevent the use of empty shell holding companies to disguise the movement of illicit funds (e.g., money laundering, financing terrorism, drug trafficking, etc.). The CTA requires certain business entities to report and file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN).

New York State has enacted a similar statute, which was amended on March 1, 2024. The New York LLC Transparency Act (NYLTA) was originally enacted on December 22, 2023, and amended by Chapter Amendment on March 1, 2024 [New York Limited Liability Company Law, Sections 1106-1108, effective January 1, 2026], requires limited liability companies (LLCs) that are or have been formed under New York law or are or wish to be qualified and authorized to do business in the State of New York to provide information to the New York Department of State disclosing the LLCs beneficial owners.  While there are certain exemptions and exclusions under both the Federal and New York State laws, there are some other key differences. The NYLTA:

Becomes effective January 1, 2026, not 2025 as the Federal law provides, and any LLC formed in or qualified to do business in New York after January 1, 2026, has 30 days from formation (or qualification) to file.  If your LLC was formed or qualified to do business in NYS before January 1, 2026, you will have until January 1, 2027, to make your initial filings.
Applies only to LLCs, not any other types of businesses, such as corporations, limited partnerships or statutory trusts.
On December 3, 2024, a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction: (1) enjoining enforcement of the CTA, as well as the implementation of the reporting requirements applicable to beneficial ownership information;  and (2) staying all deadlines required to comply with the statute’s reporting requirements.  You can read the amended order granting the injunction here: Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States (E.D. Tex., No. 4:24-cv-00478). The Department of Justice, on behalf of the Department of the Treasury, is appealing the ruling, but in the meantime FinCEN must comply with the order while it is still in effect.

Although this means that until the litigation is resolved or the injunction is lifted, companies otherwise required to file will not be subject to any liability if they fail to do so. That said, any company that wants to voluntarily file their beneficial ownership information reports may do so.

IMPORTANT NOTE: Although the NYLTA doesn’t come into effect until January of 2026, the Federal injunction does not appear to affect the NY Statute.

With thanks to James (“Jamie”) Ballard for keeping me up to date.

Stay tuned!

* (Public Law 116-283, Title LXIV of the National Defense Authorization Act for Fiscal Year 2021 (Division F) and is part of the Anti-Money Laundering Act of 2020 (AML Act). The substantive provisions of the CTA can be found in Sections 6401, 6402 and 6403 (this latter section adds § 5336 to Title 31 of the United States Code establishing the Beneficial Ownership Information Reporting Requirements).