Recent Update: On December 23, the Fifth Circuit Court of Appeals lifted the injunction, extending most filing deadlines under the Corporate Transparency Act to January 13, 2025.  Companies should prepare to meet this deadline unless otherwise advised.

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On December 3, 2024, a Texas federal court ordered the government to temporarily cease enforcement of the Corporate Transparency Act (CTA) and its reporting regulations, requiring companies to disclose details about their principals.  So for the time being, businesses do not have to meet the January 1, 2025, reporting deadline.  But as a practical matter, businesses may still want to consider filing voluntarily (or at least preparing materials) now, to avoid paying penalties in the event the injunction is eventually vacated.  The CTA impacts the art market in several significant regards:  
 
Confidentiality:  In the art market, confidentiality is paramount.  Many collectors and investors use holding companies or trusts to manage their art assets, often to maintain privacy.  The CTA aims to increase transparency in financial dealings by requiring companies to disclose their beneficial owners.  Enforcement of the CTA could require disclosure of ownership interests in corporate entities created to buy, sell, invest in, and hold artwork, impacting the confidentiality enjoyed by businesses and high-net worth individuals in the space. 
 
Compliance Burden: Many smaller art-related businesses (including entities connected with galleries, dealers, collectors, and investors in art) qualify as “reporting companies” under the CTA, and would be required to file beneficial ownership information (BOI), adding administrative and legal costs to their business models.  Moreover, the sweeping language of the statute adds compliance complexity and uncertainty; for example, it broadly defines “beneficial owner” as anyone who “indirectly…exercises substantial control” over a business or “receives substantial economic benefits” from it. Given that art businesses often operate with complex ownership structures and multiple stakeholders, entities currently have limited guidance for evaluating who might meet those criteria in a given organization.
 
Anti-Money Laundering: Given the art industry’s culture of opacity, it has faced increasing scrutiny as governments seek ways to prevent the art market from being used as a possible avenue for money laundering.  The CTA aims to combat illicit financial activity by uncovering and identifying the true owners of art-related businesses. 
 
In sum, the CTA directly affects the art market’s balance between privacy, transparency, and regulatory oversight, making this injunction a prominent development for industry stakeholders.  The government has already appealed the Texas ruling to the Fifth Circuit Court of Appeals, and there are other CTA-related lawsuits underway in other jurisdictions, including an appeal already pending.  In light of this continuing uncertainty surrounding the CTA, reporting companies should be aware that they can still make CTA filings voluntarily; alternatively, they may want to continue gathering information and preparing BOI reports and materials so that they are ready to file in the event that the requirements are reinstated.  We will continue to monitor developments in this space.