Corporate Transparency Act: New Hold on BOI Penalties and Reporting

As detailed in Holland & Knight's Feb. 19, 2025, alert "Corporate Transparency Act: It's Back," the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) imposed new beneficial ownership information (BOI) reporting deadlines on Feb. 18, 2025, as a result of a ruling by the U.S. District Court for the Eastern District of Texas in Smith v. United States Department of the Treasury, et al., on Feb. 17, 2025. The ruling lifted the preliminary injunction prohibiting enforcement of the CTA reporting rules pending final disposition of the appeal before the U.S. Court of Appeals for the Fifth Circuit.

In its notice dated Feb. 18, 2025,¹ FinCEN extended the BOI reporting deadlines and issued the following statement:

Notably, in keeping with Treasury's commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.

The Feb. 27 FinCEN Notice

The new FinCEN Notice issued on Feb. 27, 2025, provides that:

• FinCEN will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update BOI reports pursuant to the CTA by the current deadlines.
• No fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.
• FinCEN intends no later than March 21, 2025, to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence and law enforcement activities is reported.
• FinCEN intends to solicit public comment on potential revisions to existing BOI reporting requirements, which FinCEN will consider as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses while ensuring the reporting of BOI is highly useful to important national security, intelligence and law enforcement activities, as well to determine what, if any, modifications to the existing or modified deadlines referenced here should be considered.

Holland & Knight Comments

• The FinCEN announcements of Feb. 18 and Feb. 27, 2025, emphasize "Treasury's commitment to reducing regulatory burden on businesses" and "ensuring that BOI that is highly useful to important national security, intelligence and law enforcement activities is reported." Though both of these themes are mentioned in the prior analysis and guidance FinCEN issued on the CTA, FinCEN has markedly emphasized these dual prongs in its recent announcements.
• FinCEN and the Treasury Department have heeded the calls from affected parties that additional time and more definitive guidance is needed to fine-tune BOI reporting to lessen the burden on lower-risk entities.
• It should be noted that the first sentence of the Feb. 27 announcement estops enforcement actions (inclusive of fines and penalties) against "companies," but makes no mention of "individuals." As provided in the regulations and FAQs to date, recalcitrant individuals and senior officers who willfully violate the CTA (or cause a reporting company to violate the CTA) also can be liable for penalties and fines.²
• Though the Feb. 27 announcement provides that FinCEN will not issue any fines or penalties or take any other enforcement actions based the failure to file or update BOI reports, it does not expressly cover correction of errors in previously filed BOI reports.
• Both FinCEN announcements indicate an ongoing review of the BOI reporting requirements, and the Feb. 27 notice indicates that FinCEN will solicit public comments on potential revisions to minimize reporting burdens on small businesses. However, "large businesses" also face reporting burdens and regulatory ambiguities under the CTA, and it is hoped that the revised rules will clarify the BOI reporting requirements for large businesses as well.
• As reported in the previous Holland & Knight alert, it is strongly suggested that FinCEN should prioritize its review and implementation of any relief prior to reinstituting the reporting deadline. Otherwise, entities would be able to benefit from any relaxation of their reporting burdens in complying with reporting deadlines.
• While this administrative review is ongoing, several constitutional challenges to the CTA continue to work through the courts.
  • Holland & Knight's Feb. 14, 2025, alert, "Corporate Transparency Act: Government Appeals Smith Case, Seeks Reporting Rule Reinstatement," summarizes the ongoing litigation, particularly in the U.S. Courts of Appeal for the Fourth, Fifth and Eleventh Circuits. 
  • U.S. Department of Justice (DOJ) attorneys under the Trump Administration have filed briefs in the Fourth and Fifth Circuits vigorously defending the constitutionality of the CTA.
  • In the Eleventh Circuit, the appellate argument was held in September 2024, and that court has yet to issue its decision as to the constitutionality of the CTA. 
  • Interestingly, plaintiffs in another case in Texas intend to file a new motion for a preliminary injunction, which the DOJ opposes, and briefing is underway. 

• On the legislative front, the so-called "Nunn" bill, covered in the Feb. 14 alert, unanimously passed the House, and a companion bill was introduced in the Senate. The Nunn bill would extend some CTA filing deadlines until Jan. 1, 2026. We are awaiting further legislative developments to amend the CTA in Congress.
• In sum, much is going on in the executive branch, the courts and Congress, only time will tell what happens next in the saga of the CTA.

What Actions Should Reporting Companies Take Now?

• Based on the Feb. 27 announcement, stakeholders await the forthcoming announcement by FinCEN as to revised BOI reporting deadlines and additional guidance and clarity regarding reporting obligations, and they may want to delay filing BOI reports until the new reporting deadlines in the interim final rule have been adopted.
• Reporting companies should consider submitting comments to FinCEN about issues and questions they have had relating to reporting, as well as any suggested revisions to the BOI reporting requirements.

Most important, everyone should continue to remain vigilant and follow developments (including Holland & Knight alerts) closely.

Notes

¹ FinCEN Notice: FinCEN Extends Beneficial Ownership Information Reporting Deadline by 30 Days; Announces Intention to Revise Reporting Rule, Fin-2025-CTA1, Feb. 18, 2025.

² See FAQs K.2. (What penalties do individuals face for violating BOI reporting requirements?), K.3. (Who can be held liable for violating BOI reporting requirements?)