Corporate Transparency Act ‘Unconstitutional’ says Federal District Judge

A U.S. District Court in Alabama has determined that Congress overstepped its constitutional authority in passing the Corporate Transparency Act (“CTA”) (see National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)). The CTA requires the disclosure of the Beneficial Ownership Information (“BOI”) of millions of American corporations, limited liability companies, and other entities.

In the wake of this decision, FinCEN seems to have accepted the decision but only insofar as it affects its enforcement of the CTA against the named plaintiffs. The reporting obligations for the remaining 30 million or so entities is unchanged. Time will tell if FinCEN will appeal the decision and/or how it will deal with the seemingly inevitable series of similar cases that will start filling up courts across the country.

At present, we encourage businesses and other entities to continuing collecting the information necessary to complete their BOI report. Especially, as we approach the earliest deadline for filing a BOI report at the end of this month (for entities that were created on January 1, 2024, the 90-day filing deadline would be March 31, 2024). As always, businesses and business owners should consult with knowledgeable counsel prior to taking (or not taking) any action that carries the threat of criminal penalties, such as the CTA’s $10,000 fine and up to two years in jail.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at

Tax Changes Incoming for Research and Experimental Expenditures

Update (12/23/22): In the omnibus spending bill passed by Congress, no changes to the Section 174 rules requiring capitalization and amortization of research and experimentation expenses were included in the final bill of 2022. So, required capitalization will be fully applicable to the 2022 tax year.

For tax years beginning in 2022, research and experimental (R&E) expenditures are no longer immediately expensed but rather must be amortized over five years (15 years for foreign expenditures).

To illustrate, if a business spent $1,000 on domestic research activities in 2021, it could deduct the full $1,000 on its 2021 tax return. But, starting in 2022, $1,000 spent on research will be deducted incrementally over a five-year period; approximately $200. The reduction of currently allowable deductions ($800 in our example) could lead to a possible unexpected increase in taxable income, especially in the first few years that these rules apply.

How did we get here? This change to the tax treatment of R&E expenditures was included as a revenue raiser for the federal government to help pay for other tax breaks in the Tax Cuts and Jobs Act passed at the end of 2017.

Congress sometimes uses a special legislative process called “reconciliation” to quickly advance high-priority tax, spending, and debt limit legislation. This was the case with the Tax Cuts and Jobs Act passed at the end of 2017. This special legislative process of “reconciliation” comes with its own set of operating rules, one such rule being that the final legislative package must either increase or decrease revenue by a specified amount over a specified time.

So, for example, in 2017, to enact large tax cuts, the fiscal year 2018 budget resolution included instructions to the House and Senate tax-writing committees directing them to report legislation increasing the deficit by not more than $1.5 trillion over ten years. In other words, to pay for tax provisions that decreased federal revenues, there had to be tax provisions that off-set these decreases to achieve the targeted result; hence, the changes to the tax treatment of R&E expenditures.

The conventional wisdom back at the end of 2017 and the beginning of 2018, was that because the tax changes to R&E expenditures was not set to take place for 5 years in the future, Congress would act in the intervening years (we have seen this many times before, most notably with the Estate and Gift Tax Exclusion due to sunset at the end of 2025). Thus, far, Congress has not (but not without lack of trying).

There have been discussions in Congress to postpone the TJCA changes to R&E expenditures or repeal them entirely and restore the rules allowing immediate expensing of R&E expenditures. Unfortunately, these discussions seem to have stalled so far. Without any legislative relief, guidance from the IRS on implementation of the mandatory amortization post-2021 changes isneeded. To be perfectly blunt, this guidance is needed immediately for the 2022 tax year, especially for corporations that must prepare financial statements. The post-2021 tax treatment of R&E expenditures is inconsistent with financial accounting principles that requires most research and development costs to be expensed immediately.

To learn more about how the changes to R&E expenses could affect your business and for updates on the status of attempts to change the law, please contact us.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.

Headshot of Fraser Trebilcock attorney Paul V. McCordFraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or

Congress Passes SECURE Act

Yesterday (December 19, 2019), Congress finally passed the Setting Every Community Up for Retirement Enhancement Act (i.e., the “SECURE Act”), and President Trump is expected to sign it. The SECURE Act was previously passed by the U.S. House of Representatives in May on a 417-3 vote, but got held up in the Senate for political reasons, even though it enjoyed virtually unanimous support there as well.

The version of the Act that was eventually passed includes only minor changes from the version that the House passed in the Spring. This legislation is the most significant change to the laws governing retirement plans since the Pension Protection Act of 2006. Among the significant changes made by the SECURE Act are:

  • Relaxation of the rules governing eligibility to participate in a multiple employer retirement plan, which will make it easier for unrelated employers to participate in the same plan (also known as “Open MEPs”).
  • Increase in the age for required minimum distributions (“RMDs”) from 70½ to 72.
  • Required retirement plan eligibility, at least for elective deferral purposes, for long-term part-time employees who work at least 500 hours during each of three consecutive years. The Act does contain nondiscrimination testing relief with respect to these individuals.
  • Relaxation of certain timing and notice rules relating to safe harbor 401(k) plans.
  • Penalty-free distributions from qualified retirement plans for births and adoptions.

These changes, and others included in the SECURE Act, will have a major impact on both plan sponsors and participants, and will eventually require plan amendments. These changes will also have a significant impact on existing and future estate plans that involve retirement plan assets. Most of the changes are effective January 1, 2020, and thus will require almost immediate changes to plan administration.

If you have any questions about the upcoming changes made by the SECURE Act, please contact Brian Gallagher at (517) 377-0886 or

Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or

Fraser Trebilcock Attorney Visits Lawmakers in Washington, Addresses Pending Legislation Including Health Care Reform

Fraser Trebilcock Health Care Law Department Chair Jonathan Raven spent two days in Washington, DC this week to advocate for adequate federal funding and appropriate regulatory burden so that urban and rural hospitals, physicians, nurses and their colleagues can continue to provide badly needed medical care and public health services to underserved populations in our home communities.

Mr. Raven is a volunteer member of the American Hospital Association Committee on Governance, which meets throughout the year across the country and allows hospital trustees to assist in development of Capitol Hill advocacy priorities for our nation’s hospitals.   Mr. Raven is also a Board Member Emeritus

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Employers Be Wary of Upcoming Health Plan Fees

Through the passage of the Patient Protection and Affordable Care Act (“Act”), the Patient-Centered Outcomes Research Institute (“Institute”) was created to promote research to advance the quality of evidence-based medicine.  The Institute is funded through the Patient-Centered Outcomes Research Trust Fund, which is financed, in part, by fees paid by plan sponsors of applicable self-insured health plans and issuers of specified health insurance policies.  For the first year of applicability, the fee is $1 per covered life and increases for later years.

The first deadline for payment of the Patient-Centered Outcomes Research Institute (PCORI) fee is this July 31, 2013.

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Obama and Death Taxes

President Obama spoke about the future of federal estates tax during his recent bus tour through the Midwest. A family farmer expressed her concern about the pending return of the 2001 federal estate tax exemption in 2013. If Congress and the President fail to act, the federal estate tax exemption per person will drop to $1,000,000, commencing January 1, 2013. The exemption is currently $5,000,000 per person.

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Seeking Consensus Through Controversy

Why do we always have to wait for the last hour before something gets done in Washington? No, I take that back, Congress exceeds the deadline by which to decide on important issues so they or The White House pass extensions on laws, such the Transportation Equity Act or the No Child Left Behind Act or even the budget so they by time before a decision has to be made. The stalemate on what to do about the debt ceiling is no exception and just the status quo. While the Democrats and Republicans have been talking there seems to be an impasse, where no one is agreeing with anybody, even on the most basic of issues. It seems that Washington, needs the support and guidance of a neutral third party to resolve these disputes and bring some closure to a number of long standing issues, most importantly today, the debt ceiling.

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Cutting through the clutter

This week marked the official kickoff of the 2012 Presidential Election. From now until August 2012, we will be bombarded with candidates announcing their candidacy, being critical of each others policies and otherwise complicating the issues that are now before Congress.

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