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Last spring, I received an email from a colleague who had just completed a legal education course where she learned about a law passed several years ago that would significantly impact her small business clients starting Jan. 1.
This law required owners of closely held corporations, limited liability companies, and other business entities to register their ownership interests with the federal government. I was surprised such a sweeping federal requirement had not received broader attention, given its implications for many businesses.
In January 2021, Congress overrode a presidential veto to pass the National Defense Authorization Act for Fiscal Year 2021. Among its provisions was the Corporate Transparency Act, which aimed to combat illegal activities such as money laundering and the misuse of shell corporations.
The CTA requires certain companies to disclose their ultimate beneficial owners to the Financial Crimes Enforcement Network through Beneficial Ownership Information Reports. The reporting deadline for existing companies was originally set for Jan. 1.
However, legal challenges have created uncertainty around the CTA's implementation. On Dec. 3, a U.S. District Court in Texas issued a nationwide injunction preventing enforcement of the CTA, effectively vacating the Jan. 1 deadline.
The federal government appealed, and on Dec. 23, the 5th Circuit Court of Appeals issued a stay of the injunction, reinstating the deadline and extending it to Jan. 13. Then, on Dec. 26, the court vacated its stay, suspending the reporting requirement once again.
Joel LockeAs it stands, companies are not currently required to comply with the CTA or submit BOIRs, though FinCEN continues to accept voluntary submissions. The 5th Circuit Court of Appeals is expected to hear substantive arguments in the case in March, leaving the future of the CTA unresolved.
Another area of uncertainty is the Federal Estate Tax Exemption. Adjusted annually for inflation, the exemption for 2025 has been set at $14.99 million per individual and $29.98 million for married couples.
These rates were significantly increased by the Tax Cuts and Jobs Act, enacted in 2018, which temporarily doubled the exemption amounts. However, unless Congress acts, the TCJA provisions will sunset on Dec. 31, 2025, reducing the exemption to pre-TCJA levels —approximately $7 million per individual and $14 million per couple, adjusted for inflation.
For individuals potentially affected by this change, there is an opportunity to make tax-free lifetime gifts before Jan. 1, 2026, to lock in the higher exemption amounts. Whether Congress will extend the TCJA or allow it to expire remains uncertain, with competing legislative priorities potentially complicating the matter.
Navigating legal and financial planning in times of uncertainty is challenging. At Allison MacKenzie law firm, we remain committed to staying informed on legislative developments and providing our clients with the guidance they need to adapt to a changing legal landscape. If you have questions about these issues or how they may affect you, feel free to contact us.
Joel Locke joined Allison MacKenzie in 2007. A native Nevadan, Joel Locke graduated from the University of Nevada, Reno in 2000, and then obtained his law degree from Gonzaga University School of Law in 2006. He was admitted to practice law in the State of Nevada in 2006. He currently is a shareholder attorney at Allison MacKenzie Ltd. and serves as a board member for the Board of Governors for the State Bar of Nevada.