For the small businesses supporting school transportation, the Corporate Transparency Act may be more than a speed bump in 2025.
In hopes of preventing criminals from hiding illegal acts through corporate anonymity, Congress passed the Corporate Transparency Act in 2021, sandwiched into a larger 1,482-page defense bill. The law initially took effect on Jan. 1, 2024, requiring companies to disclose stakeholder information to the Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN, by Jan. 1, 2025.
In an order that called the law outright Orwellian, however, a federal judge on Dec. 3 granted an injunction blocking the Corporate Transparency Act from being enforced — a decision that U.S. attorneys quickly appealed, putting the fate of the act in legal limbo.
If the Fifth Circuit Court of Appeals upholds the lower court’s decision, the Corporate Transparency Act will become a thing of the past. But if the appeals court overturns the injunction, businesses may have to file the required benefit ownership report very quickly.
Advertisement
While the federal judge in Texas granted an injunction blocking the Corporate Transparency Act from being enforced, a federal judge in Oregon denied a similar request in September, which will be reviewed by the Eleventh Circuit Court of Appeals.
Parties often ask the U.S. Supreme court to review split decisions among appeals court, but since the high court holds arguments for less than 1 percent of the cases submitted, it is impossible to know whether it will step in.
In the meantime, small businesses should keep the law on their radar. If it is revived, failure to report required information could result in $591 fines per day of violation as well as up to two years in jail and up to $10,000 in penalties.
“In a limbo like this the best practice is to be ready to file,” said Megan Henderson, an attorney at the Longmont, Colorado firm Lyons and Gaddis.
Specializing in real estate and business transactions, Henderson said she spent much of the past year advising clients on becoming compliant under the Corporate Transparency Act.
Most businesses that filed paperwork with their state to become incorporated would be required to disclose their beneficial owners with the federal government, but exemptions abound. One big carve out is for larger companies generating more than $5 million in gross receipts annually. The umbrella of “beneficial owners” might be broader than some people think and covering not just owners but indispensable managers as well.
FinCEN published a brief guide to help businesses navigate the requirements. While neither a lawyer nor an accountant is required to file the paperwork, the process can seem daunting, especially for mom and pop establishments with limited time and resources.
“It’s going to impact the contractors that service the school districts,” said Chris Wojciechowski, an accountant at the Bonadio Group in Rochester, New York.
Wojciechowski said the regulation is more burdensome to small businesses with fewer resources.
“There’s such a tight timeline regarding compliance,” he continued. “So how is our businesses going to deal with this? They’re going to have to be nimble and be on top of the transition if they turn the law back on.”
Related: (STN Podcast E238) Time Will Tell: Shakeups in the School Bus Business World (+ Thomas Built Buses CEO Interview)
Related: IRS Publishes Final Rule on Direct Pay for Tax-exempt Government Agencies
Related: Business As Usual for Collins Bus Customers, Says Forest River
Even if the Corporate Transparency Act is ultimately defeated in the courts, businesses should still be on the lookout for similar legislation at the state level. One of the first copycat laws comes from New York lawmakers, requiring companies to report ownership by Jan. 1, 2026.
“It’s tricky because every state has their own regulations. I’ve seen companies who operate in one state come to another state and get slapped pretty hard with fines because they did not dig deep into the state regulations for school buses in that state,” said Mark Szyperski, president of On Your Mark Transportation, a consultancy firm based in Nashville, Tennessee.
For Szyperski, who grew up on the seat of his father’s Greyhound bus between Bay City and Detroit, Michigan, transportation is a family business.
Upon entering a new state, Szyperski said he often arranges to speak with the state’s school bus administrator to go over the basics. To be ready for the court’s outcome on the Corporate Transparency Act, he set up a Google alert and included news of the injunction in his newsletter.
“People need to be aware that [the injunction] could be overturned and then you best be getting ready to put the information into the system,” he said.
