Thousands of food-producing farms and ranches are off the hook from a federal bureaucracy with powers to send them to jail. This means that, at the moment, nobody has to send papers to the Treasury Department’s Financial Crimes Enforcement Network. (FinCEN)
FinCEN wants to punish failure to file or update with up to two years in prison and fines of $10,000. Civil penalties would run $591 per day.
“Across the country, cattle producers are relieved that this mandate is on hold while the courts are considering the law,” said National Cattlemen’s Beef Association Executive Director of Government Affairs Kent Bacus. “NCBA will continue working with Congress to provide a permanent fix to the Corporate Transparency Act that protects family farmers and ranchers.”
The early Christmas present came from a Texas federal court judge who issued a nationwide injunction Wednesday, nullifying the controversial Corporate Transparency Act. The government will likely appeal in what will be a long litigation road.
However, the latest decision halted the implementation of the CTA’s beneficial reporting requirements.
That 2021 rule would have required more than 32 million corporate entities to disclose their “beneficial owners” to the Treasury Department by Jan. 1, 2025.
The ruling by the Texas judge blocks enforcement of the new Treasury Department rule just a few days before millions of businesses and corporate entities were going to be required to file reports with the federal government.
These were supposed to help law enforcement combat business misconduct, such as money laundering, organized crime, and terrorism.
The treasury department claimed the law was needed to identify bad actors who conduct criminal activity anonymously through their businesses.
Targets of the rule say federal overreach places a heavy burden on small businesses.
In his ruling of Texas Top Cop Shop Inc. v Garland, Judge Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas agreed with plaintiffs who argued the CTA fell outside of Congress’s authority to regulate interstate and international commerce.
The judge called the rule requiring state-registered companies to report to the federal government a “drastic” departure from history.
“For good reason, plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government,” Mazzant said.
According to an October American Farm Bureau Federation analysis, more than 230,000 farming operations would have been required to submit “beneficial ownership information” to the Treasury Department.
The reporting rule applied to individuals with at least 25 percent ownership of the operation and those who exercise “substantial control.” Businesses subject to this rule would have been required to submit documents providing business details, personal information, and copies of certain government IDs.
These would also be required to update the Treasury Department with any changes to their information.
Failure to comply with the rule would have resulted in felony charges and up to two years in jail. The defendants could also have been subject to escalating fines of anywhere from $500 per day to $10,000 per violation.
Mazzant’s ruling only prevents the Corporate Transparency Act from taking effect on Jan. 1. The case is still being heard in the courts, where other judges could rule differently and higher courts are hearing other challenges.
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