March 6, 2025, Update
The U.S. Treasury Department announced on March 2 that it is suspending enforcement of the Corporate Transparency Act (CTA) against U.S. citizens and domestic reporting companies. Treasury further noted that it would soon issue proposed rulemaking to narrow the scope of the reporting requirements to foreign reporting companies only. Details can be found in the press release itself, found at the link below:
This follows, as reported earlier, that in mid-February the U.S. Treasury Department extended the deadline for reporting Beneficial Ownership Information (BOI) for most companies to March 21, 2025, and Treasury followed up with a second announcement on February 27 that it would not issue fines or penalties or take any other enforcement actions for companies for failure to file or update BOI reports by that current deadline.
The attorneys at Cranfill Sumner will continue to monitor the various dockets and legislation for updates in order to keep our clients informed.
February 24, 2025, Update
FinCEN Extends BOI Reporting Deadline
On February 18, 2025, after additional court rulings, the U.S. Treasury Department extended the deadline for reporting Beneficial Ownership Information (BOI) for most companies to March 21, 2025. FinCEN, the Treasury Department’s enforcement arm for the Corporate Transparency Act (CTA), issued its notice that day, indicating that enforcement of the CTA would resume. This notice follows previous actions by FinCEN that had earlier extended the deadline, following a series of rulings in federal cases since early December that had delayed the enforcement of the CTA. The recent notice from FinCEN is linked below:
FinCEN Notice, FIN-2025-CTA1, 2/18/2025.
Accordingly, most companies formed prior to January 1, 2025, will be subject to the March 21, 2025 deadline unless further judicial, legislative, or FinCEN actions intervene.
There are indications that FinCEN would consider additional modifications to the deadlines and potentially adjust the scope of companies that are required to file BOI reports. The U.S. House of Representatives has voted to extend the applicable deadlines until 2026, and a similar bill has been introduced in the Senate, but it is too soon to predict the outcome. Companies should be cautious and consult with counsel before relying on any such changes, though, until they are announced.
January 28, 2025, Update
On January 23, 2025, the U.S. Supreme Court granted a motion by the U.S. Department of Justice to stay the injunction issued in early December by the federal district court in the Texas Top Cops Shop case.
However, the filing requirements under the Corporate Transparency Act (CTA) remain suspended because of a limited injunction issued on January 7 in a separate lawsuit (the Smith case, also in Texas), blocking the reporting deadline nationwide. It remains to be seen whether the Supreme Court’s order causes the Smith court to reconsider its injunction or leads to a separate order staying that injunction. Texas Top Cops Shop will now go back to the Fifth Circuit Court of Appeals, with oral arguments scheduled for March.
In the meantime, FinCEN, the Treasury Department’s enforcement arm for the CTA, issued an alert on January 24, stating that companies are, at least for now, not required to comply with Beneficial Ownership Information (BOI) reporting until further court or agency decisions are made.
Original Article from December 5, 2024
Court Order Enjoins Enforcement of Federal Corporate Transparency Act Nationwide
The Corporate Transparency Act (“CTA”) has hit a roadblock, and it is now subject to a nationwide injunction on both its implementation and its enforcement. On December 3, 2024, stemming from a lawsuit filed by several businesses and individual plaintiffs (Texas Top Cops Shop, Inc., et al., v. Merrick Garland, Attorney General of the United States, et al.), Judge Amos L. Mazzant, United States District Court Judge for the Eastern District of Texas, Sherman Division, issued an order imposing a preliminary injunction on the CTA and its Reporting Rule. The CTA was passed by Congress in January of 2021 as part of the fiscal year 2021 National Defense Authorization Act and the included Anti-Money Laundering Act of 2020. The CTA reflected Congress’ efforts to thwart money laundering and financing of terrorist organizations by imposing obligations for transparency on business entities across the country through the CTA’s Reporting Rule by requiring disclosure of names, identifying information, and credentials (tagged as “Beneficial Ownership Information” or “BOI”) of individuals who are beneficial owners of corporations, limited liability companies, and similar entities formed under state laws, and establishing federally controlled databases for retention of such information.
Implementation and enforcement of the Reporting Rule would have required millions of companies across the U.S. to submit BOI – sensitive personal information of tens of millions of individuals – to the U.S. Government by certain deadlines, with one critical deadline of January 1, 2025, imminently approaching. The Court ordered that the compliance deadlines shall be stayed, stating without exception that the government may not enforce the Reporting Rule and explicitly ordering that reporting companies need not comply with the January 1, 2025, filing deadline. The Court recognized that Congress had “admirable ends” in its enactment of the CTA, but nevertheless noted the plaintiffs’ arguments that the CTA was unconstitutional in that it violated the States’ authority under the Ninth and Tenth Amendments, violated individuals’ First Amendment rights of association and compelled speech, and violated the Fourth Amendment by compelling disclosure of private information.
This injunction is preliminary only, and as the Court noted, is not fully conclusive as to whether the CTA will be ultimately upheld; but it does signal that the plaintiffs met their burden of showing the substantial likelihood of success, as well as, showing that there is a substantial risk of harm to individual, beneficial owners by its enforcement. Unlike prior injunctions, this one applies across the board to all beneficial owners nationwide, not just those that are litigating the case in the Fifth Circuit.
Corporations, LLCs, and other business entities with an interest in this ruling should consult with their attorneys to determine the scope of their obligations in light of this order. If the injunction is lifted on appeal, the timing of any required reporting under the CTA will need to be considered. As well, if the injunction remains in effect and the CTA is eventually overturned, questions will be raised as to how individuals and companies can protect the multitude of personal data that they have submitted already.
