Federal judges halts filing requirement set to take effect in January

A federal court in the Eastern District of Texas has halted a federal filing requirement set to take effect in January that could have left farmers and ranchers facing fines or imprisonment.

Beneficial Ownership Information filing requirements under the Corporate Transparency Act (CTA) would have mandated that millions of businesses file reports on owners with at least a 25% stake with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)by Jan. 1.

The CTA of 2021 was aimed at combating money laundering, according to U.S. Treasury Secretary Janet Yellen. But organizations including the American Farm Bureau Federation (AFBF) worried the act could create confusion for growers.

Many farms are structured as either a c-corporation, s-corporation or limited liability company (LLC), which would have been required to register if they employed fewer than 20 employees or receive under $5 million in cash receipts —which covers the vast majority of farms, according to an AFBF release.

Businesses that failed to file, or didn’t update records when needed, could have faced criminal fines up to $10,000 and additional civil penalties of up to $591 per day. Failure to file may also have led to felony charges and up to two years in prison, according to the release.

“I think every small business in America is likely to be surprised,” Dustin Sherer, Farm Bureau director of government affairs, said in a September interview with Produce Processing. “(On) Jan. 1, 2025, you’re going to likely have tens of millions of businesses that are felons overnight as a result of this law.”

An analysis by American Farm Bureau Federation economists showed more than 230,000 farms were required to file, but government data indicated less than 11% of all eligible businesses nationwide had done so, according to the release.

“Farmers and ranchers across the country have faced great uncertainty since the passage of the Corporate Transparency Act in early 2021 and as the Beneficial Ownership Information regulations have been written,” Zippy Duvall, AFBF president, said in the Dec. 4 release. “Questions are swirling about who is required to file and who will have access to the confidential data being collected.”

Lawsuits challenging the CTA were filed in six states. In March, a U.S. District Court ruled that the act was unconstitutional and unfairly burdened small businesses — a decision the Treasury Department appealed.

“Farm Bureau has long fought against the mandated disclosure of farmers’ private business information to the federal government in a number of different scenarios,” Duvall said. “For a second time this year, a federal court has ruled the CTA oversteps the Constitution on that front. We appreciate the temporary reprieve provided by the injunction and hope Congress can take a cue from the courts in the coming weeks to provide a more permanent resolution to this problematic policy.”