Wyoming businesses are facing a deadline to fill out a small form that could cause them major headaches if not filed by Jan. 13.
The form is part of the Corporate Transparency Act 2021, a law that aims to combat money laundering by requiring small businesses to reveal their owners.
It was blocked as unconstitutional by a Texas court. But two days before Christmas and with only five business days left in the year, the Fifth Circuit Appeals Court in Louisiana reversed the Texas court’s order and reinstated the law while the lawsuit continued. The original filing deadline was January 1, but the Treasury Department has granted an extension until January 13.
That 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 uphold its sovereignty,” Gray wrote in the letter. “I formally request that your office take immediate legal action to challenge the constitutionality of the CTA, and seek a temporary restraining order, a preliminary injunction enforcing its enforcement in Wyoming, and also a permanent command.”
Attorney General Bridget Hill’s office did not respond to Cowboy State Daily’s questions about whether she plans to file charges, as Gray has urged.
Not the right approach to financial crimes
Proponents of the Corporate Transparency Act have said the beneficial ownership reports are needed to crack down on those who use LLCs and corporate trusts to create a veil of corporate secrecy that protects financial crimes such as tax fraud, money laundering, the financing of conceals terrorism and other questionable activities. .
However, Gray has said the law is too broad and is not the right way to address these issues.
“This puts a huge burden on a company at the end of the year without any warning,” Gray said. “Monday’s decision reversed the order that would have postponed the implementation of the CTA until the new administration took office. The CTA is unconstitutional and inconsistent with the history of how the United States practices corporate law and combats fraud.”
Gray said it will also place a huge burden on small businesses, including Wyoming ranchers, and subject them to potentially steep fines of up to $591 per day for failure to report, as well as possible prison sentences.
“I have spoken to so many business owners who are unaware of the new federal requirements, and with this ruling, after January 13, they will be subject to massive fines and prison sentences for a bill that has already been declared unconstitutional in two separate cases. appellate courts,” Gray told Cowboy State Daily on Thursday.
Tying Trump’s hands
Gray was also critical of the deadline set for January 13 – just before a new government takes office on January 20.
“This prevents the new Trump administration and Congress from taking action to repeal this bill before the deadline by 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. President Trump even vetoed the CTA during his first term.”
That veto was overridden by Congress in 2020 and the CTA became law in 2021.
“If the repeal of the law occurs after that deadline, companies will already be forced to report,” Gray said. “That is why, in response to Monday’s ruling, I sent a letter to Wyoming Attorney General Bridget Hill on Tuesday requesting that he take immediate action on behalf of the people of Wyoming by seeking to enforce the CTA in Wyoming with an order to stop.”
Gray said Hill’s office has already filed amicus briefs opposing the bill, but he believes now is the time to take more action.
“The CTA criminalizes good actors with overburdening and unconstitutional reporting requirements,” Gray said in his letter to Hill, adding: “States like Wyoming must take a strong stand to stop this federal overreach on our lives before thousands of Wyomingites are affected with civil and criminal violations. by an unconstitutional bureaucracy in Washington DC on January 13, 2025.”
More about beneficial owners
The Corporate Transparency Act applies to private, for-profit companies registered to do business in the United States that have twenty or fewer employees or $5 million or less in gross sales or income.
It does not apply to publicly traded companies or nonprofits, which already have their own reporting requirements.
There are 23 exemptions listed by FinCEN, the Financial Crimes Enforcement Network, including banks, credit unions, insurance companies, public utilities, tax-exempt entities and inactive entities.
Under the CTA, beneficial ownership information must be filed by anyone considered a “beneficial” owner of a business, even if he or she does not own the business or has only an indirect interest.
An individual is considered a beneficial owner if they have significant influence over the company’s decisions or activities, such as a president or CEO, or if they own at least 25% of a company’s stock or have a comparable level of control over the company’s equity.
The report requires taxpayer identification numbers, legal names and trademarks, as well as current U.S. addresses for the principal business location or, if a foreign-based company, a U.S. operating location.
Companies registered or incorporated after January 1, 2024 must list not only the owners, but also the names, addresses, birthdays and identification numbers of the applicant, such as permits or passports, and the jurisdiction of the said documents.
The forms are not required annually, but should be updated whenever the information changes, including changes due to marriage or divorce, changes of address, a new driver’s license with a new number, and so on. Updates are also needed for operational changes when tasks are delegated to a new person, giving that person substantial control over the company, even if that person does not own the company.
It is important not to confuse the new CTA requirement with the filing of beneficial ownership returns that may be required by financial institutions from companies to FinCEN.
Although banks and credit unions use that process to protect themselves from being used for illegal activities, this filing is an entirely different reporting requirement and does not meet the new obligation under CTA.
According to the U.S. Chamber of Commerce’s Small Business Guide, failure to file required paperwork on time can result in fines of up to $10,000, as well as criminal penalties, which may include jail time.
Gray: Wyoming already takes fraud seriously
Wyoming has received some criticism lately as a “haven of secrecy.” It’s recently Delaware overtaken for the most business registrations per capita, according to the OpenCorporates database, which tracks companies around the world.
Critics say Wyoming’s strict privacy laws are attracting the wrong kind of companies to the Cowboy State: companies that want secrecy to hide financial misdeeds. Similar criticism has been leveled at Delaware, when it led the way in corporate registrations.
Wyoming’s “cowboy cocktail” trust laws allow an LLC, rather than a named individual, to serve as trustee of a trust. With an anonymous shell company at the helm of the trust and a Wyoming-registered LLC, the corporate veil becomes much more private and harder to pierce, critics say.
That has led to reports that entities like Russian oligarch Igor Markov and the Argentine Braggio family have stashed their money in Wyoming to hide questionable business dealings from prying eyes.
Gray said his office takes the matter seriously and has “addressed the cowboy cocktail and fraud in true constitutional ways driven by state policy.”
“In 2023, our office began using a statute to implement a procedure that allows entities to be administratively dissolved when a false document is filed with our office,” he said. Dissolutions of fraudulent entities have occurred using this process, including entities associated with North Korea.”
Gray has also been working on new state laws to address fraud during the 2024 midterms through the Joint Corporations, Elections, and Political Subdivisions Committee, which are expected to work their way through the Legislature in 2025.
Renee Jean can be reached at [email protected].