Wyoming businesses face a deadline to fill out a tiny form, which could cause them a big headache if it’s not filed by Jan. 13.
The form is part of the Corporate Transparency Act of 2021, a law aimed at thwarting money laundering by requiring small businesses to disclose their owners.
It was blocked by a Texas court as unconstitutional. But two days before Christmas and with only five business days left in the year, Louisiana’s Fifth Circuit Court of Appeals overturned the Texas court’s injunction and reinstated the law while the trial continues. The original deadline to file an application was January 1, but the Treasury Department granted an extension until January 13.
This prompted Secretary of State Chuck Gray to write a letter to Wyoming Attorney General Bridget Hill urging her to intervene and seek an injunction against the CTA in the Cowboy State.
“The State of Wyoming must act immediately to protect the citizens of Wyoming and maintain its sovereignty,” Gray wrote in the letter. “I formally request that your office immediately initiate a lawsuit challenging the constitutionality of the CTA and seek a temporary restraining order, a preliminary injunction to prohibit its enforcement in Wyoming, as well as a permanent injunction.”
Attorney General Bridget Hill’s office did not respond to Cowboy State Daily’s inquiries about whether she plans to file charges, as Gray requested.
This is not the right approach to financial crimes
Supporters of the Corporate Transparency Act have said beneficial ownership reporting is needed to crack down on those who use LLCs and corporate trusts to create a veil of corporate secrecy that hides financial crimes like tax fraud, money laundering, terrorist financing and other questionable activities. .
Gray, however, said the law was too broad and not the right way to address these issues.
“It puts a huge burden on businesses at the end of the year with very little warning,” Gray said. “Monday’s ruling overturned the injunction that would delay implementation of the CTA until the new administration takes office. The CTA is unconstitutional and inconsistent with the history of how the United States treats business law and combats fraud.
Gray said it would also place a huge burden on small businesses, including Wyoming ranchers, subjecting them to potentially hefty fines of up to $591 per day for failure to report, as well as possible jail time.
“I have spoken to many business owners who were unaware of the new federal requirements and with this decision they will face huge fines and jail time after January 13 for a bill that has already been ruled unconstitutional in two different countries. appeals court,” Gray told Cowboy State Daily on Thursday.
Tie Trump’s hands
Gray also criticized the January 13 deadline – just before a new administration takes office on January 20.
“This prevents the new Trump administration and the new Congress from being able to take action to repeal this bill before the deadline, setting the deadline one week before President Trump takes office,” Gray said. “I am very optimistic that President Trump and the new Congress will repeal the law. In fact, President Trump vetoed the CTA during his first term.
This veto was overridden by Congress in 2020 and the CTA became law in 2021.
“If the repeal of the law comes after this deadline, companies will have already been required to report,” Gray said. “For this reason, I sent a letter in response to Monday’s decision to Wyoming Attorney General Bridget Hill on Tuesday, asking her to take immediate action on behalf of the citizens of Wyoming in seeking to end enforcement of the CTA in Wyoming with an injunction.”
Gray said Hill’s office has already filed amicus briefs opposing the law, but he believes the time is right to take more action.
“The CTA criminalizes good actors with overly burdensome and unconstitutional reporting requirements,” Gray said in his letter to Hill, adding: “States like Wyoming must take a strong stand to end this federal interference in our lives before thousands of Wyoming residents face civil and criminal violations at the hands of an unconstitutional bureaucracy in Washington, DC on January 13, 2025.”
Learn more about beneficial owners
The Corporate Transparency Act applies to private, for-profit corporations registered to do business in the United States that have 20 or fewer employees or $5 million or less in gross sales or receipts.
This does not apply to publicly traded companies or nonprofit organizations, which already have their own reporting requirements.
There is 23 exemptions listed by FinCEN, the Financial Crimes Enforcement Network, including banks, credit unions, insurance companies, utilities, tax-exempt entities and inactive entities.
Under the CTA, beneficial ownership information must be filed by anyone considered to be a “beneficial” owner of a company, even if they do not own the business or have only an indirect interest. .
A person is considered a beneficial owner if he or she has major influence over the decisions or operations of the company, such as a president or CEO, or if he or she owns at least 25% of the shares of a company or has a similar level of control over the company’s equity.
The report requires tax identification numbers, legal names and trademarks, and current U.S. addresses for the company’s primary location or, if it is a US-based company. abroad, for an operational site in the United States.
Businesses registered or established after January 1, 2024 must also include not only the owners, but also the names, addresses, dates of birth and identification numbers of the applicants such as licenses or passports, as well as the jurisdiction of these documents .
Forms are not required every year, but must be updated whenever information changes, including changes due to marriage or divorce, change of address, new driver’s license with new number, etc. Updates are also required for operational changes if tasks are delegated to a new person, giving them substantial control over the business, even if that person does not own the business.
It is important not to confuse the new CTA requirement with beneficial ownership disclosures that may be required by a company’s financial institutions to FinCEN.
Although banks and credit unions use this process to protect against illegal activity, this filing constitutes an entirely different reporting requirement and does not fulfill the new obligation under the CTA.
Failure to submit required documents on time is punishable by fines of up to $10,000, as well as criminal penalties of up to prison, according to the Chamber of Commerce’s small business guide of the United States.
Gray: Wyoming already takes fraud seriously
Wyoming has recently been criticized as a “secret haven.” It’s recently passed the Delaware for the most business registrations per capita, according to the OpenCorporates database, which tracks activity worldwide.
Critics said Wyoming’s strict privacy laws attracted the wrong type of companies to the Cowboy State — companies that want secrecy to hide their financial misdeeds. Similar criticisms were leveled at Delaware despite it leading the nation in business registration.
Wyoming’s “cowboy cocktail” trust laws allow an LLC, instead of an appointee, to be the controller of a trust. With an anonymous shell company running the trust and an LLC registered in Wyoming, the corporate veil becomes much more private and difficult to pierce, critics say.
This led to reports that entities like Russian oligarch Igor Markov and the Argentine Braggio family stashed their money in Wyoming to hide questionable business dealings from prying eyes.
Gray said his office took the matter seriously and “attacked the cowboy cocktail and fraud in a truly constitutional and state policy-driven manner.”
“In 2023, our office began using legislation to implement a procedure to allow administrative dissolution of entities when a false document was filed with our office,” he said. Fraudulent entity dissolutions have occurred using this process, including entities linked to North Korea.”
Gray also worked on new state laws to combat fraud during the 2024 interim period through the Joint Committee on Corporations, Elections and Political Subdivisions, which are expected to make their way through the Assembly legislative in 2025.
Renee Jean can be reached at renee@cowboystatedaily.com.