Wyoming businesses are facing a deadline to fill out a small form that could cause them a major headache if it isn’t submitted by Jan. 13.
The form is part of the Corporate Transparency Act of 2021, a law aimed at preventing 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 just five business days left in the year, the Fifth Circuit Court of Appeals in Louisiana overturned the Texas court’s decision and reinstated the law while the court case continues. The original filing deadline was January 1, but the Treasury Department has extended it until January 13.
This has prompted Secretary of State Chuck Gray to write a letter to Wyoming Attorney General Bridget Hill, asking her to step in 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 am formally requesting that your office immediately commence legal action challenging the constitutionality of the CTA and seek a temporary restraining order, a preliminary injunction to enjoin its enforcement within Wyoming, and a permanent injunction as well.”
Attorney General Bridget Hill’s office did not respond to Cowboy State Daily’s questions about whether she intends to file charges as Gray has requested.
It is not the right approach to financial crimes
Advocates 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 hides financial wrongdoing such as tax fraud, money laundering , terrorist financing and other suspicious activities. .
Gray, however, has said the law is too broad and is not the right way to address these problems.
“It puts a huge burden on (a) business at the end of the year with very little warning,” Gray said. “Monday’s decision reversed the order that would have delayed the implementation of the KTA until the new administration takes office. The CTA is unconstitutional and contrary to the history of how the United States approaches business law and attacks fraud.”
Gray said it will also be a huge burden on small businesses, including Wyoming farmers, subjecting them to potentially hefty fines of up to $591 a day for failure to report, as well as possible jail time.
“I have spoken with so many business owners who were unaware of the new federal requirements and with this decision, they will be subject to extraordinary fines and jail time after January 13th for a bill that has already been declared unconstitutional in two different . appellate courts,” Gray told Cowboy State Daily on Thursday.
Tying Trump’s hands
Gray was also critical of the Jan. 13 deadline — shortly before the new administration takes office on Jan. 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 a 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.
That veto was overridden by Congress in 2020 and the CTA became law in 2021.
“If the law is repealed after this deadline, businesses will already be required to report,” Gray said. “For this reason, I issued a letter in response to Monday’s ruling on Tuesday to Wyoming Attorney General Bridget Hill requesting that she take immediate action on behalf of the citizens of Wyoming seeking to stop the enforcement of the CTA in Wyoming with an order”.
Gray said Hill’s office has already filed amicus briefs challenging the law, but he believes now is the time to take more action.
“The CTA criminalizes good actors with burdensome and unconstitutional reporting requirements,” Gray said in his letter to the Hill, adding, “States like Wyoming must take a strong stand to stop this federal overreach into our lives before thousands of Wyomingans face civil and criminal violations at the hands of 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 20 or fewer employees or have $5 million or less in sales or gross income.
It does not apply to publicly traded or not-for-profit companies, which already have their own reporting requirements.
there are 23 exceptions 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 submitted by anyone who is considered a “beneficial” owner of a corporation, even if they do not own the company or only have an indirect stake.
An individual is considered a beneficial owner if they have a major influence on the company’s decisions or operations, such as the president or CEO, or if they own at least 25% of a company’s stock or have a similar level of control over the company’s capital.
The report requires taxpayer identification numbers, legal names and trademarks, and current U.S. addresses for either the principal business location or, if a foreign-based corporation, a U.S. operational location.
Businesses registered or established after January 1, 2024, must also include not only the owners, but also the names, addresses, birthdays and identification numbers of the applicant, such as licenses or passports, and the jurisdiction of said documents.
The forms are not required every year, but must be updated whenever information has changed, including changes due to marriage or divorce, changes of address, new driver’s license with a new number, etc. Updates are also required for operational changes if duties are delegated to someone new, giving them significant control of the business, even if that person does not own the business.
It is important not to confuse the new CTA requirement with beneficial ownership filings that may be required of a business’s financial institutions by FinCEN.
While 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 satisfy the new obligation under the CTA.
Failure to submit the required documents on time is subject to fines of up to $10,000, as well as criminal penalties that can include jail time, according to the U.S. Chamber of Commerce’s small business guide.
Gray: Wyoming already takes cheating seriously
Wyoming has been treated a bit like a “secrecy haven” lately. It is recently crossed the Delaware for the most corporate registrations per capita, according to the OpenCorporates database, which tracks business worldwide.
Critics have said Wyoming’s strong privacy laws are attracting the wrong kind of businesses to the cowboy state — businesses that want the secrecy to hide financial wrongdoing. Similar criticism has been leveled at Delaware when it was leading the nation in corporate registrations.
Wyoming’s “cowboy cocktail” trust laws allow an LLC, rather than a nominee, as the controller of a trust. With an anonymous shell company at the head of the trust and an LLC registered in Wyoming, the corporate veil becomes much more private and difficult to pierce, critics say.
This has led to reports that entities such as Russian oligarch Igor Markov and Argentina’s Braggio family have stored their money in Wyoming to hide shady business deals from prying eyes.
Gray said his office takes the issue seriously and has “attacked the cowboy cocktail and fraud in real constitutional ways driven by state policy.”
“In 2023, our office began using a statute to implement a procedure that allows entities to be administratively dispersed when a false document is presented to 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 attack fraud during the 2024 midterm through the Joint Committee on Corporations, Elections and Political Subdivisions, which are expected to pass the Legislature in 2025.
Renée Jean can be reached at renee@cowboystatedaily.com.
