Courts
The original deadline for entities subject to the U.S. Corporate Transparency Act (CTA) which were formed prior to January 1, 2024 was January 1, 2025. However, as a result of litigation in the U.S. federal courts, two nationwide injunctions were issued by different judges in two separate cases in the U.S. District Court for the Eastern District of Texas. The plaintiffs in each of these cases claimed CTA violates the U.S. Constitution.
The first nationwide injunction (Texas Top Cop Shop, Inc.) was eliminated in January 2025 after the U.S. Supreme Court ruled against the plaintiffs on January 23, 2025. The decision left us wondering whether the U.S. District Court for the Eastern District of Texas or the U.S. Court of Appeals for the Fifth Circuit would suspend the second nationwide injunction (Smith) in light of the U.S. Supreme Court decision. However, no immediate action was taken by the courts regarding the Smith injunction.
New Administration
President Trump was sworn into office on January 20, 2025, the new Secretary of the U.S. Department of Treasury (which FinCEN is part of) was sworn in on January 28, 2025 , and the new U.S. Attorney General was sworn in on February 5, 2025. President Trump is viewed as pro-business so it was not clear whether his administration would defend the constitutionality of CTA. We heard the answer on February 5, 2025 when the U.S. Department of Justice filed a motion to eliminate the second nationwide injunction so that CTA can become mandatory again.
The plaintiff filed its response brief with the court on February 14, 2025. If the court is going to rule in FinCEN’s favor, it is possible the court will not offer the U.S. Department of Justice the opportunity to file a reply brief. This means that we may hear as early as this week whether CTA will become mandatory again.
[Note: The court rulings regarding the injunctions are not rulings on the substance of either Texas Top Cop Shop, Inc. or Smith. Each of these cases have schedules for filing their main briefs and being heard in court. In the meantime, similar cases against the CTA have been decided in other federal courts in favor of the U.S. Government.]
FinCEN
The U.S. Department of Treasury / FinCEN indicated in its motion to the court that if the injunction is eliminated, the new CTA deadline for reporting would be 30 days from the court order. FinCEN also mentioned that it may consider making changes to the CTA regulations to accommodate lower-risk entities:
“As a matter of policy, Treasury continues to assess the potential burden of the Final Rule. If this Court grants the stay, FinCEN intends to announce that it will extend the compliance deadline for thirty days. During that period, FinCEN intends to assess its potential options to prioritize reporting for those entities that pose the most significant national security risks while providing relief to lower-risk entities and, if warranted, amending the Final Rule.”
Congress
On February 10, 2025, the U.S. House of Representatives unanimously passed the Protect Small Businesses from Excessive Paperwork Act of 2025. A companion bill was introduced in the U.S. Senate on February 12, 2025. If passed by the U.S. Senate, entities subject to the CTA which were formed prior to January 1, 2024 would have a new deadline of January 1, 2026 to complete their reporting. There are some important points to consider regarding this Congressional activity:
A similar CTA reporting extension did not succeed in December 2024.
This proposed legislation did not include any attempt to eliminate CTA.
Any entity formed on or after January 1, 2024 would not be included in the extension.
Any entity which has already filed its Beneficial Ownership Information Report (BOIR) and that has updates and/or corrections to make would not be included in the extension – even if the entity was formed prior to January 1, 2024.
Next Steps
If the injunction is eliminated, be prepared to file your initial BOIR and updates/corrections to previously filed BOIRs within the next 4-5 weeks depending on the date of the court decision. If the team member assigned to handle CTA will be on holiday, make sure someone else is aware and available to assist in gathering the required information.
If the law is amended to allow the new January 1, 2026 deadline, make sure you are keeping records of any BOs who change. We do not know if there will be a requirement to include BOs from the January 1, 2024 through January 1, 2026 period in your initial BOIR.
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