Accounting
Judge halts CTA and BOI reporting enforcement
The U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the Corporate Transparency Act and its beneficial ownership information reporting requirement.
In its ruling, the court determined that the CTA and the reporting rule “are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and [the] reporting rule are contrary to law or that they amount to a violation of the Constitution.”
The court went further and ruled that this is a nationwide injunction, applying against enforcement of the CTA and its impending Jan. 1, 2025, filing deadline.
Beginning Jan. 1, 2024, the CTA imposed a requirement to file beneficial ownership information with the Treasury’s Financial Crimes Enforcement Network, or FinCEN. Existing companies were required to file within the year 2024, while a new company started during the year would have 30 days to file. It was estimated that there would be 32.6 million filings in 2024 and between 5 and 6 million each year thereafter. The penalty for failure to comply is a $500 per day penalty, capped at $10,000.
A beneficial owner is one who directly or indirectly exercises “substantial control” over the reporting entity, or who directly or indirectly owns or controls 25% or more of the ownership interests of the reporting entity.
“We have always thought that a delay was necessary in the filing requirement,” said Roger Harris, president of Padgett Business Services. “That’s because of issues with the 30-day rule, and a lack of guidance on substantial ownership. This is almost a nail in the coffin of the current deadline.”
“We’re telling our people to continue to gather the information necessary to file the report, but to inform clients of where we are regarding the court injunction,” he continued. “We will wait until we get further information from FinCEN and DOJ before we file a report unless the client tells us to go ahead and file. What I hope we hear is that FinCEN believes it will take too long to resolve all the court cases and the outstanding issues about how the current program is being implemented, and will extend the deadline for one year to Jan. 1, 2026.”
Easing restrictions, sharpening personal attention and clarifying denials are among the aims of
The programs focus on “fast track settlement,” which allows IRS Appeals to mediate disputes between a taxpayer and the IRS while the case is still within the jurisdiction of the examination function, and post-appeals mediation, in which a mediator is introduced to help foster a settlement between Appeals and the taxpayer.
The IRS has been revitalizing existing ADR programs as part of transformation efforts of the agency’s new strategic plan, said Elizabeth Askey, chief of the IRS Independent Office of Appeals.
“By increasing awareness, changing and revitalizing existing programs and piloting new approaches, we hope to make our ADR programs, such as fast-track settlement and post-appeals mediation, more attractive and accessible for all eligible parties,” said Michael Baillif, director of Appeals’ ADR Program Management Office.
Among other improvements, the pilots:
- Align the Large Business and International, Small Business and Self-Employed and Tax Exempt and Government Entities divisions in offering FTS issue by issue. Previously, if a taxpayer had one issue ineligible for FTS, the entire case was ineligible.
- Provide that requests to participate in FTS and PAM will not be denied without the approval of a first-line executive.
- Clarify that taxpayers receive an explanation when requests for FTS or PAM are denied.
Another pilot, Last Chance FTS, is a limited scope SB/SE pilot in which Appeals will call taxpayers or their representatives after a protest is filed in response to a 30-day or equivalent letter to inform taxpayers about the potential application of FTS. This pilot will not impact eligibility for FTS but will simply test the awareness of taxpayers regarding the availability of FTS.
A final pilot removes the limitation that participation in FTS would preclude eligibility for PAM.
The traditional appeals process remains available for all taxpayers.
Inquiries can be addressed to the ADR Program Management Office at
The Internal Revenue Service has updated and added new guidance for taxpayers claiming the Energy Efficient Home Improvement Credit and the Residential Clean Energy Property Credit.
The updated
New sections have been added on how long a taxpayer has to claim the tax credits, guidance for condominium and co-op owners, whether taxpayers who did not previously claim the credit can file an amended return to claim it, and a series of questions on qualified manufacturers and product identification numbers. Other material has been added on how to claim the credits, what kind of records a taxpayer has to keep for claiming the credit, and for how long, and whether taxpayers can include financing costs such as interest payments in determining the amount of the credit.
The IRS states that “financing costs such as interest, as well as other miscellaneous costs such as origination fees and the cost of an extended warranty, are not eligible expenditures for purposes of the credit.”
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