UPDATE: What's Happening With the Corporate Transparency Act

UPDATE: On March 21, 2025, FinCEN submitted an interim final rule exempting domestic companies and U.S. persons from reporting requirements under the Corporate Transparency Act and extending the reporting deadline for foreign companies. Read more in this advisory.

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Updated March 4, 2025

Department of Treasury and FinCEN Suspend CTA Fines and Penalties for BOI Report Filings and Updates and Preview Interim Rule

On February 27, 2025, the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) announced that it will not take any enforcement actions against companies for failure to file or update beneficial ownership information (BOI) reports to comply with the Corporate Transparency Act (CTA), including the imposition of any fines or penalties.

FinCEN also previewed that it plans to issue an interim final rule prior to the current March 21, 2025, deadline to extend BOI reporting deadlines and potentially issue additional rules in the future to reduce the burden on small businesses.

Following FinCEN's announcement, the U.S. Department of Treasury released a separate statement on March 2, 2025, indicating that it would not enforce the CTA reporting rule even beyond the current March 21, 2025, deadline and previewed that it would be issuing additional proposed rulemaking to limit the scope of the CTA's reporting rule to cover only foreign reporting companies.

We are continuing to monitor for updates from FinCEN and the U.S. Department of Treasury. Our previous updates are below.

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Update from February 19, 2025: Corporate Transparency Act Resumes as Preliminary Injunction Is Stayed

On February 17, 2025, the U.S. District Court for the Eastern District of Texas granted a motion to stay the preliminary injunction that had previously paused CTA reporting requirements. As a result, CTA reporting requirements are once again in effect.

FinCEN subsequently announced that it is extending the CTA reporting deadline for most reporting companies from February 19, 2025, to a new deadline of March 21, 2025. During this 30-day period, FinCEN has indicated it will consider options to modify the reporting deadlines, while prioritizing reporting for entities that pose significant national security risks.

Reporting companies that were previously given a reporting deadline later than March 21, 2025 must file their initial BOI report by that later deadline. For example, if a reporting company's deadline was in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.

Background

The CTA is a federal law that requires certain businesses to provide FinCEN with beneficial ownership information. This law was enacted to enhance transparency in business ownership, supporting the government's efforts to combat financial crimes and prevent money laundering.

Under the CTA, companies in existence as of January 1, 2024, are required to submit BOI reports to FinCEN. Although FinCEN initially set a reporting deadline of January 1, 2025, legal developments led to temporary suspensions of these reporting requirements.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas imposed a nationwide injunction on enforcement of the CTA in connection with Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al. (Texas Top Cop Shop).

Since that initial injunction, federal courts have alternated between lifting and reinstating nationwide injunctions, effectively starting and stopping the reporting obligations.

The 5th Circuit subsequently lifted the Texas Top Cop Shop injunction in response to an appeal by the government defendants. Just days later, a different panel of judges for the 5th Circuit overturned the decision and reinstated the injunction. Texas Top Cop Shop eventually reached the U.S. Supreme Court, where an emergency application for stay of the injunction was granted on January 23, 2025.

Coinciding with these events, Smith v. United States Department of Treasury (Smith) also contested the CTA's constitutionality in the U.S. District Court for the Eastern District of Texas. The legal developments in Smith mirrored those in Texas Top Cop Shop: the District Court issued a separate nationwide injunction on January 7, 2025, which again paused the CTA's reporting requirements. However, following the Supreme Court's ruling on January 23, 2025, the Texas District Court reversed course and issued a stay on the injunction on February 17, 2025.

Government Responses

Looking ahead, FinCEN also expressed an interest in revising the BOI reporting rule to alleviate the burden on lower-risk businesses, including many U.S. small businesses.

On February 10, 2025, the U.S. House of Representatives unanimously passed the Protect Small Business from Excessive Paperwork Act of 2025, H.R. 736. This bill would extend the reporting deadline to January 1, 2026, for reporting companies formed prior to January 1, 2024. The bill is currently under review by the U.S. Senate.

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Update from January 24, 2025: On January 23, 2025, the Supreme Court (the "Court") lifted an injunction on the enforcement of the Corporate Transparency Act ("CTA") that was initially put in place by a District Court in Texas in connection with the Texas Top Cop Shop, Inc. v. McHenry (formerly Texas Top Cop Shop v. Garland) case ("Texas Top Cop Shop"). However, in the intervening period between the government defendants' emergency application to the Court in the Texas Top Cop Shop case and the Court's January 23, 2025, decision, the same Texas District Court issued a separate injunction in connection with the Smith v. United States Department of Treasury case ("Smith") staying the CTA's reporting requirement. The U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has confirmed that it plans to comply with the second injunction. Consequently, for the time being, the reporting obligations under the CTA remain suspended.

On December 26, 2024, the 5th Circuit reinstated a nationwide injunction on enforcement of the CTA that was initially imposed by a U.S. District Court in the Texas Top Cop Shop case and temporarily lifted by an earlier decision by a different panel of judges for the 5th Circuit on December 23, 2024.

Subsequently, the government defendants in the case filed an emergency application with the Court on December 31, 2024, to stay the injunction and reimpose reporting obligations under the CTA, or minimally, limit the application of the injunction to the plaintiffs in the Texas Top Cop Shop case. The defendants also requested that the Court treat the application as a writ of certiorari for purposes of addressing the limited question of whether the District Court acted within the scope of its authority in applying its injunction nationwide.

On January 3, 2025, the Court granted the defendants' request to stay the District Court's nationwide injunction on enforcement of the CTA pending the 5th Circuit's resolution of the Texas Top Cop Shop case and any subsequent writ of certiorari appealing the 5th Circuit's decision to the Court.

However, on January 7, 2025, while the Texas Top Cop Shop defendants' emergency application was under review by the Court, the same Texas District Court issued a separate injunction in the Smith case, which stayed the reporting rule under the CTA. Following the Court's decision in Texas Top Cop Shop, FinCEN confirmed that it will comply with the injunction in Smith, and as a result, reporting companies are not required to file beneficial ownership reports for the time being (though they may continue to do so voluntarily).

At this time, it is unclear whether the government defendants in Smith will appeal the District Court's decision in that case or how the 5th Circuit will rule in the Texas Top Cop Shop case following oral arguments schedule for March 25, 2025. There are also numerous challenges to the CTA both within Congress and across various federal courts.

Reporting companies should continue to monitor for updates regarding their potential reporting obligations under the CTA.

In the meantime, taking into account the Court's decision in Texas Top Cop Shop and the injunction issued in Smith, the events related to both cases and associated injunctions can be described, in brief, as follows:

• December 3, 2024: In connection with the Texas Top Cop Shop case, the U.S. District Court for the Eastern District of Texas imposes a nationwide injunction on enforcement of the CTA, pausing all associated reporting obligations.
• December 23, 2024: In response to an appeal by the defendants in the Texas Top Cop Shop case, the 5th Circuit lifts the injunction, and later the same day, FinCEN extends several reporting deadlines under the CTA.
• December 26, 2024: A different panel of judges for the 5th Circuit vacates the 5th Circuit's decision from December 23, 2024, reinstates the Texas Top Cop Shop injunction, and again pauses reporting obligations under the CTA.
• December 31, 2024: The defendants file an emergency application with the Court, requesting that it lift the Texas Top Cop Shop injunction and reimpose the CTA's reporting obligations.
• January 7, 2025: In connection with the Smith case, the U.S. District Court for the Eastern District of Texas imposes a nationwide injunction on the reporting rule under the CTA, pausing all associated reporting obligations.
• January 23, 2025: The Court grants the government defendants' motion to stay the injunction on enforcement of the CTA in the Texas Top Cop Shop case but does not address the parallel injunction on the CTA's reporting rule in Smith.
• January 24, 2025: FinCEN issues a statement indicating that it will comply with the injunction issued in the Smith case and confirms that reporting companies will not be subject to liability for failing to report beneficial ownership information while that injunction remains in place.

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December 26, 2024: 5th Circuit Reinstates Injunction Pausing Enforcement of the Corporate Transparency Act

On December 26, 2024, the 5th Circuit vacated its earlier decision from December 23, 2024, lifting a U.S. District Court's nationwide injunction on enforcement of the CTA.

The "merits panel" of judges that vacated the 5th Circuit's prior decision is comprised of a different group of judges than those that make up the "motions panel" that initially lifted the injunction.

FinCEN has since confirmed that it will again comply with the injunction and that filing obligations are temporarily paused while the injunction remains in effect. FinCEN has stated that reporting companies may voluntarily continue to file their beneficial ownership reports. See FinCEN's website for additional details and current information.

The 5th Circuit has scheduled oral arguments on the merits of the District Court's injunction for March 25, 2025. There are numerous challenges to the CTA both within Congress and across various federal courts, and reporting companies should continue to monitor for updates regarding their potential obligations under the CTA.

For additional information regarding the CTA and the recently vacated 5th Circuit decision, please see our initial advisory below.

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Initial Client Advisory Regarding 5th Circuit Decision Staying Injunction of CTA Enforcement

After a preliminary injunction temporarily halted the enforcement of the Corporate Transparency Act ahead of its January 1, 2025, reporting deadline for companies formed prior to 2024, the 5th Circuit has lifted the injunction. FinCEN published a statement following the 5th Circuit's order, granting certain reporting companies additional time to comply with reporting obligations (see further information below).

On December 23, 2024, the U.S. Court of Appeals for the 5th Circuit granted a motion for a temporary stay of the injunction pending appeal. The 5th Circuit found that the government had met its burden of proof and had demonstrated that a stay was warranted.

Background

The CTA took effect on January 1, 2024, requiring reporting companies file beneficial ownership information with the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN). The law was enacted to increase ownership transparency for the government's aims of preventing money laundering and combatting financial crimes.

Among other things, the CTA requires that companies in existence as of January 1, 2024, submit beneficial ownership information reports to FinCEN by the deadline of January 1, 2025.

5th Circuit Decision Lifting Injunction

In Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al., six plaintiffs challenged the constitutionality of the Corporate Transparency Act (CTA) under the First and Fourth Amendments of the U.S. Constitution. The U.S. District Court for the Eastern District of Texas ruled in favor of the plaintiffs, issuing a preliminary injunction to block the enforcement of the CTA nationwide. The decision temporarily stopped the filing obligations of an estimated 32.6 million existing reporting companies.

The ruling by the 5th Circuit on December 23, 2024, lifted the injunction, which means reporting companies are required once again to file their beneficial ownership information with FinCEN.

Impact on Reporting Companies' Filing Obligations

Following the 5th Circuit decision, FinCEN extended several reporting deadlines under the CTA, including those for reporting companies formed prior to 2024, which now have until January 13, 2025, to file their beneficial ownership information reports with FinCEN. For a full list of the CTA filing deadlines extended by FinCEN, please visit FinCEN's website here.

The court's stay does not represent a final decision regarding the CTA or its reporting requirements. The 5th Circuit ordered that the appeal of the case is to be expedited to the next available oral argument panel.