The Corporate Transparency Act (CTA) Rollercoaster Continues and Could Be In Play Soon
By David H. Freedman and Jordan M. Small
The CTA could be back in play soon.
The following was posted by the Financial Crimes Enforcement Network (FinCEN) on its website on February 6, 2025.
Alert: Ongoing Litigation – Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.) & Voluntary Submissions
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to submit beneficial ownership information reports voluntarily.
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On January 7, 2025, in the case of Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Tyler Division, issued an order enjoining the government from enforcing the CTA against the plaintiffs and staying FinCEN’s regulations implementing the CTA’s reporting requirements (31 C.F.R. § 1010.380). On February 5, 2025, the Department of Justice—on behalf of the Department of the Treasury (Treasury)—filed a notice of appeal of the district court’s order and, in parallel, has sought to stay that order as the appeal proceeds.
If the district court’s order is stayed, thereby allowing FinCEN’s Reporting Rule to come back into effect, FinCEN intends to extend the reporting deadline for all reporting companies 30 days from the date the stay is granted. Further, in keeping with the Treasury’s commitment to reducing the regulatory burden on businesses, FinCEN, during that period, will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.
In the meantime, FinCEN is complying with—and will continue to comply with—the district court’s order for as long as it remains in effect. As a result, FinCEN is not currently enforcing the CTA against the plaintiffs in that action—Samantha Smith and Robert Means—and their related entities. FinCEN is also not presently enforcing the requirements of 31 C.F.R. § 1010.380 against any individual or entity.
Reporting companies are not currently required to file beneficial ownership information with FinCEN. Reporting companies may continue to voluntarily submit beneficial ownership information reports, free of charge, using FinCEN’s E-Filing system.
A Refresher on Prior CTA Activity
On February 5, 2025, the Department of Justice (DOJ) filed an appeal with the Fifth Circuit Court of Appeals of the U.S. District Court’s preliminary injunction in the Texas federal court case, Smith v. U.S. Department of the Treasury, which blocked the enforcement of the beneficial ownership information (BOI) reporting requirement.
The DOJ asked that the injunction be put on hold while the appeal proceeds. Although it is not known, given that the U.S. Supreme Court reversed the Fifth Circuit’s reinstatement of the preliminary injunction on January 23, 2025, in the Texas federal court case, McHenry v. Texas Top Cop Shop, Inc., it is possible that the Fifth Circuit will grant the DOJ’s request for a stay of the injunction. This means the beneficial ownership reporting mandate could be back in play soon with a possible new set of deadlines and rules from FinCEN.
However, while the Smith court’s injunction remains in place, businesses are not currently required to file any initial reports, updates, or corrections, although they may do so voluntarily.
Maddin Hauser attorneys continue to monitor these developments and provide updates as they emerge. Follow our CTA blog and other social media for the latest news.