Key Takeaways
- On Feb. 5, the U.S. government appealed the district court decision that issued a nationwide stay of the effective date of the Corporate Transparency Act’s (CTA) reporting rule and filed a motion to immediately stay that order pending appeal.
- A decision on the stay motion is expected soon and, given the Supreme Court’s recent decision to grant a stay in substantially similar circumstances, the government seems likely to prevail.
- In a new public alert, the Financial Crimes Enforcement Network (FinCEN) confirmed that, if the stay is granted, it intends to (i) extend the reporting deadline for all reporting companies for a then-additional 30 days and (ii) assess its options to narrow the reporting requirements for lower-risk entities.
Government Seeks Immediate Stay (and Is Likely To Win)
On Feb. 5, the U.S. government filed (i) a notice of appeal of the order issued Jan. 7 by a U.S. District Court in Texas in Smith v. U.S. Department of Treasury, No. 6:24-cv-336-JDK (E.D. Tex. Jan. 7, 2025), which had issued a nationwide stay of the effective date of the final rule establishing the CTA’s reporting requirements and deadlines, and (ii) a motion to immediately stay that nationwide order pending such appeal.
Given the Supreme Court’s recent decision to grant a stay in materially identical circumstances in Texas Top Cop Shop, Inc. v. McHenry (formerly Texas Top Cop Shop, Inc. v. Garland), it seems likely that the district court will grant the government’s request to stay the nationwide order pending appeal.
FinCEN Signals 30-Day Extension, Will Consider Narrowing Certain Reporting Requirements
If the stay motion is granted, the CTA would immediately come back into effect. However, in a new alert posted on its BOI page, FinCEN stated that:
- it “intends to extend the reporting deadline for all reporting companies by 30 days” (presumably from the date on which the stay is granted, if applicable); and
- during this 30-day period, it “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.”
Decision Expected Soon
In an ordinary case, the district court would give the plaintiffs a few days to respond to the stay motion and issue a ruling shortly thereafter. Here, the district court could issue a ruling on a faster timetable in light of the recent Supreme Court decision discussed above. Accordingly, a decision is likely expected by the end of next week but could come at any time.
Ultimate Outcome Unclear
Although FinCEN mentioned only a 30-day extension, it remains possible that the new administration will put off the filing deadline for a longer period, or even indefinitely, as it considers its position on the CTA. So far, the administration’s political appointees have not addressed the issue, but they are facing pressure from allies and groups challenging the CTA to put it on hold to pursue amendments or even repeal the law.
We will continue to provide updates regarding further material developments as they arise.
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