AM Law Alert Update : The CTA is Back… Again
On February 17, 2025, the U.S. District Court for the Eastern District of Texas in Smith v. U.S. Department of the Treasury lifted its own prior preliminary nationwide injunction against enforcement of the Corporate Transparency Act (CTA), with such holding now aligning with the Supreme Court of the United States’ recent decision staying the nationwide injunction in a separate case, Texas Top Cop Shop, Inc. v. Merrick Garland.
What does this mean for you? As of today, the Financial Crimes Enforcement Network (FinCEN) has indicated that the beneficial ownership information (BOI) reporting requirements pursuant to the CTA are now back in effect and mandatory. According to the most recent FinCEN guidelines, “For the vast majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. FinCEN will provide an update before then of any further modifications of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.” FinCEN announced, in addition, that it intends to prioritize BOI reporting for those entities that pose the most significant national security risks, which presumably means that “lower-risk” small businesses may have reduced regulatory burdens as part of any future modifications to the BOI reporting requirements.
As can be surmised given the seemingly unremitting back-and-forth judicial holdings related to the CTA, the constitutionality of the CTA remains a contentious issue in both the courts and the U.S. Congress. Oral arguments on the constitutional merits of the CTA in Texas Top Cop Shop, Inc. v. Merrick Garland are set for March 25, 2025, in the U.S. Court of Appeals for the Fifth Circuit. The U.S. House of Representatives unanimously passed the “Protect Small Business from Excessive Paperwork Act of 2025” (H.R. 736) on February 10, 2025, which, if passed by the U.S. Senate, would extend BOI reporting deadlines to January 1, 2026, for those entities which were created prior to January 1, 2024. Another bill, the “Repealing Big Brother Overreach Act,” was also advanced in the House, which would repeal the CTA and its reporting requirements in their entirety.
Given the upcoming 5th Circuit case on the merits and the recent Congressional initiatives to either substantially modify or flat out repeal the CTA, we are diligently following all developments and will provide pertinent updates on a situation that remains in flux.
For more information, please contact Conner Bourne.
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