What the Recent Injunction Against the Corporate Transparency Act (CTA) Means for Your Business
Dec 05, 2024
On Tuesday, a federal court in Texas issued a nationwide injunction prohibiting the enforcement of the Corporate Transparency Act (CTA). The CTA, which was set to require an estimated 32.5 million companies in the U.S. to report sensitive information about their beneficial owners (BOI) to FinCEN by January 1, 2025, is now on hold due to constitutional concerns.
What Does This Mean for You?
The court’s decision means that companies are no longer obligated to meet the January 1, 2025, BOI reporting deadline or comply with related CTA requirements. While this provides immediate relief, the ruling is not necessarily final. The federal government is expected to appeal, and higher courts, including the Supreme Court, may weigh in.
For now, the CTA’s enforcement is paused. However, the broader legal battle is likely to continue, and the final outcome remains uncertain.
Our Recommendation
We advise clients to remain proactive:
- Continue Gathering Information: If your business falls under the CTA’s reporting requirements, we recommend you gather the necessary BOI information. Preparing now will help ensure compliance should the injunction be lifted or the requirements reinstated. Check out our BOI Insights & Resource Hub for details.
- Stay Informed: Legal and regulatory landscapes can shift quickly. We will continue to monitor developments closely and provide updates as the situation evolves.
- Be Ready to File: While enforcement is currently halted, the best course of action is to be prepared to submit your BOI report promptly if needed.
The implications of the Corporate Transparency Act injunction go beyond compliance and touch on broader concerns about federal authority and privacy. Rest assured, we are here to guide you through these changes and keep you informed. If you have questions or need assistance navigating these requirements, please get in touch with a member of our BOI reporting team at wvco.com/contact-us.
Categories: Tax Compliance
Understanding the Visa and Mastercard Settlement
May 21, 2024
What You Need to Know About the $5.54 Billion Credit Card Settlement
Recently, credit card giants Visa and Mastercard reached a $5.54 billion settlement with merchants overinflated credit card interchange fees, commonly known as “swipe fees.” This decades-long legal battle has resulted in the largest antitrust class-action settlement in U.S. history.
What Does This Mean for Merchants and Consumers?
While the Visa and Mastercard settlement still awaits approval by a federal court, its approval could benefit not only merchants but consumers as well.
Key Points of the Settlement:
- Visa and Mastercard have agreed to lower published credit-card interchange fees by four basis points in the U.S. for at least three years.
- Neither company will raise interchange fees for five years above the rates that were in place at the end of 2023.
According to a statement from one of the law firms involved in the settlement, “the interchange fee reduction could save merchants $29.79 billion in the five years after the settlement is approved.”
Eligibility for Claim Submission
If your business accepted Visa and/or Mastercard between January 1, 2004, and January 25, 2019, you may be eligible for a share of a $5.54 billion payment card settlement. This includes businesses that have since closed or gone bankrupt.
How to Submit a Claim
In an Order dated May 14, 2024, the Court granted an extension of the claims-filing deadline. The new deadline to submit claims is now August 30, 2024.
The official court-authorized settlement website can be found here.
There are two methods by which you can submit a claim:
- If you received a Claim Form in the mail and want to file a claim online using the Claimant ID provided, you will select that option on the settlement website.
- If you did not receive a claim form in the mail, you can begin the claim filing process by clicking the button for Taxpayer Identification Number (TIN). Once you create your account using your TIN, you will need to provide supporting proof of authorization documentation in order to access your interchange transaction fees. Proof of authorization could be a certificate of incorporation, a certificate of dissolution, a W-9, or a utility bill.
For step-by-step instructions on submitting a claim by either method, review the following video provided by the court-authorized website: https://www.youtube.com/watch?v=TuHOnvlVFpI
Potential Settlement Payout
The amount you receive from the settlement fund will be based on your actual or estimated interchange fees attributable to Visa and Mastercard transactions between January 1, 2004, and January 25, 2019.
Factors Influencing Payout Amount:
- The total dollar value of all valid claims filed.
- The cost of class administration and notice.
- Applicable taxes on the settlement fund.
- Attorney fees and expenses.
Money awards to the Rule 23(b)(3) Class Plaintiffs for their representation of merchants in MDL 1720, culminating in the Class Settlement Agreement, all approved by the Court.
Conclusion
The Visa and Mastercard settlement represents a significant resolution to a long-standing issue affecting merchants and consumers. By understanding the details and eligibility criteria, businesses may use this settlement to recoup some costs incurred from inflated swipe fees. For more information and to submit your claim, visit the official settlement website: https://www.paymentcardsettlement.com/en
Categories: Other Resources
Congress Announces Bipartisan Tax Agreement In The Works
Jan 22, 2024
Last week, the chairs of the congressional tax committee unveiled a significant $78 billion bipartisan tax agreement poised to enhance the Child Tax Credit and offer substantial support to businesses. Named the “Tax Relief for American Families and Workers Act of 2024,” this pivotal legislation awaits the green light from both houses of Congress to be enacted into law. As the 2023 tax filing season commences on January 29, this introduces a narrow window for the bill’s approval and implementation.
Here are some of the key proposed provisions:
- Expanded Child Tax Credit – The deal outlines enhancements to the child tax credit in an attempt to provide relief to families that are struggling financially and those with multiple children. It would also lift the tax credit’s $1,600 refundable cap and adjust it for inflation by $200 per child to $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025.
- Section 174 – The proposed law would postpone the requirement to capitalize and spread out the cost of domestic research and experimental expenses over multiple years. This change would apply to tax years starting from January 1, 2022, but the new rules wouldn’t take effect until tax years that begin after December 31, 2025. However, for research and experimental costs incurred outside of the U.S., these costs would still need to be spread out over a 15-year period.
- Section 163(j) – Under this draft bill, business deductions would be restored a less restrictive limitation for net interest expense, returning to a 30 percent limit based on EBITDA (earnings before interest, taxes, depreciation, and amortization) rather than EBIT (earnings before interest and taxes).
- Bonus Depreciation – The bill would temporarily restore 100 percent bonus depreciation for property placed in service between January 1, 2023, and December 31, 2025. It also would allow 20% bonus depreciation for property placed in service after December 31, 2025, and before January 1, 2027. For property placed in service after January 1, 2027, no bonus depreciation would be allowed.
- Employee Retention Tax Credit (ERC) – Under this deal, businesses would no longer be able to claim the popular ERC credit as of January 31, 2024. In addition, it would also extend the statute of limitations for ERC claims to six years from the date the claim was filed. Finally, it includes more stringent penalties for ERC promoters.
Please keep in mind that this bipartisan tax agreement is still in the proposal stage and must pass through the legislative process to become a law. As always, we will continue to monitor the status of this proposed bipartisan agreement, and keep you apprised of any developments. Please reach out to your tax advisor to discuss how this may impact your tax situation.
Categories: Tax Planning
Moore v. United States: The Supreme Court’s Tax Dilemma
Dec 13, 2023
In the world of taxes, all eyes have been on the Supreme Court and the case of Moore v. United States. What makes this case so monumental, you ask? It’s not every day that the Supreme Court hears arguments around tax laws affecting individuals, much less a high-stakes case that could redefine the meaning of taxable income.
At the heart of Moore v. United States is a provision of the Tax Cuts & Jobs Act (TCJA) enacted in 2017, requiring companies to pay taxes on foreign profits that had previously been untaxed. This mandatory repatriation tax is now being called unconstitutional by one Washington state couple.
In 2005, Charles and Kathleen Moore invested $40,000 in KisanKraft, a farm equipment retailer based out of India. The couple alleges that they never received any foreign profit payments from the company because all such profits were reinvested by KisanKraft. The Moores argue that such “unrealized gains” are not actually income and therefore should not be taxed. Their case argues that the TCJA provision violates apportionment requirements under the 16th Amendment because it allegedly taxes them on ownership of personal property — in this case, their KisanKraft shares — rather than on realized or received income.
While the Moores are simply seeking a refund of the one-time $15,000 increase in their tax bill due to the change in the law, the case carries much broader implications. A ruling in their favor could threaten other provisions of the tax code. The Justice Department has also noted that a ruling by the Supreme Court invalidating the mandatory repatriation tax could cost the U.S. government $340 billion over the next decade. That amount could grow exponentially if the decision invalidates other tax provisions as well.
While a ruling is not expected until June of 2024, some justices have signaled the possibility of upholding the tax by attributing the income earned by the foreign company to its shareholders. William Vaughan Company’s tax team is closely monitoring updates in the Moore v. United States case. Be sure to subscribe to our insights as we continue to share any breaking news on the ruling.
Categories: Tax Compliance
Beneficial Ownership Information (BOI) Reporting Requirements
Oct 23, 2023
What is BOI Reporting?
Beneficial Ownership Information (BOI) Reporting is a framework developed by the Financial Crimes Enforcement Network (FinCEN) that mandates certain businesses to disclose specific information about their “beneficial owners.” The new reporting guidelines were formed as an effort to enhance financial transparency and curtail illicit financial activities by illuminating the individuals who own or control certain foreign or domestic entities registered to do business within the U.S.
Who is Required to Report Beneficial Ownership Information?
Domestic companies required to report include corporations, LLCs, and other similar entities formed through the registration with a secretary of state or similar office. Certain entities, such as large companies with over 20 million dollars in revenue, those that employ more than 500 full-time employees, and entities that operate under extensive regulatory scrutiny, among others, may be exempt from BOI reporting. In total, there are 23 types of entities exempt from reporting requirements, making it extremely important to carefully review FinCEN’s qualifying criteria, (published in their Small Entity Compliance Guide,) before concluding that your company is exempt.
Key Reporting Elements Defined
- Beneficial Owner(s): the FinCEN defines Beneficial Owners as individuals who own or control (either directly or indirectly,) at least 25% of the ownership interest in a reporting company, or hold “substantial control” over the company.
- Substantial Control: according to the FinCEN, an individual holds substantial control over a reporting company if the individual meets any of four general criteria:
- The individual is a senior officer;
- The individual has authority to appoint or remove certain officers or a majority of directors of the reporting company;
- The individual is an important decision-maker; or
- The individual has any other form of substantial control over the reporting company.
- Required Reporting Information: includes the name, date of birth, address, and an identifying number (e.g., a driver’s license or passport number) of each beneficial owner, as defined above.
Reporting Timelines - Existing Entities: Business that were formed as of January 1, 2024, must submit an initial BOI report by January 1, 2025.
- New Entities: Those businesses created or registered after January 1, 2024, must report within 30 days of creation/registration.
- Updates: Any changes or updates to a business’s BOI structure must be reported within 30 days of occurrence.
How to Report Beneficial Ownership Information
BOI reports must be submitted electronically through FinCEN’s secure, online filing system, which will be accessible starting January 1, 2024. FinCEN is currently not accepting any beneficial ownership information reports.
Next Steps
- Identify and verify Beneficial Owners: Ensure you have accurate, verifiable information for all individuals who hold a significant interest or control in your company.
- Understand your reporting obligations: Dive into the specifics of what information needs to be reported and acquaint yourself with the reporting formats and guidelines included in the Small Entity Compliance Guide linked above.
- Engage Professional Assistance: Consider connecting with WVC’s team of tax advisors who continue to remain on top of BOI reporting mandates to ensure accurate and timely filing.
- Stay Informed: Sign up for WVC Insights to receive regular updates and additional guidance on BOI reporting guidelines to ensure your business maintains continuous compliance.
Concluding Thoughts
Complying with BOI reporting requires businesses to exercise diligence in maintaining accurate records, understand the mechanics of the reporting framework, and exhibit punctuality in submissions. Strategic partnerships with professional experts can help pave the way for seamless compliance and fortified financial transparency.
Ensuring that your business is well-prepared to successfully navigate both BOI reporting mandates and other critical tax updates is William Vaughan Company’s top priority. Connect with a trusted WVC tax advisor today to see if your business qualifies to report on Beneficial Ownership Information under the updated framework.
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Categories: Tax Compliance