Read the Feb. 17 Order Issued by the U.S. District Court for the Eastern District of Texas
The courts have spoken, and the last nationwide injunction has fallen. FinCEN has a green light to enforce the Corporate Transparency Act, and the federal agency has set a new deadline in March for companies to report.
Following the U.S. Supreme Court’s decision to lift the nationwide injunction against enforcement of the CTA in Texas Top Cop Shop, the second temporary restraining order in the Eastern District of Texas blocking CTA enforcement was stayed, pending appeal. The order was issued on Feb. 17 in Smith v. U.S. Department of the Treasury.
The Smith case was the only other nationwide injunction in place, which means, according to the court system, FinCEN can now proceed with requiring millions of businesses to file and disclose the information of their beneficial owners under the CTA.
FinCEN has issued updated guidance. For the vast majority of reporting companies, the new deadline to file a BOI report is now March 21, 2025; unless later deadline applies. Reporting companies that were previously given a reporting deadline later than the March 21, 2025 deadline must file their initial BOI report by that later deadline.
The CTA was signed into federal law in 2021 as part of the National Defense Authorization Act that requires individuals with an ownership interest in a limited liability company to disclose personal data with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The CTA was enacted by Congress as an expansion of the anti-money laundering laws, intended to prevent terrorist financing, corruption, tax fraud, and other illicit activity.
Failure to comply could result in up to two (2) years of jail time and a $10,000 fine per violation.
The CTA went into effect on Jan. 1, 2024, but courts have gone back and forth on the constitutionality of the act. Before the SCOTUS ruling on Texas Top Cop Shop, the status of the CTA flip-flopped three times in December:
- On Dec. 3, 2024, Judge Amos L. Mazzant III, of the U.S. District Court for the Eastern District of Texas, granted a nationwide preliminary injunction to temporarily block the enforcement of the CTA, ruling the act unconstitutional. The opinion was published in Texas Top Cop Shop, Inc. v. Garland (E.D. Tex., No. 4:24-cv-00478).
- On December 23, 2024, the Fifth Circuit overturned the Texas District Court’s nationwide injunction regarding the Corporate Transparency Act (“CTA”), requiring companies to report.
- On Dec. 26, 2024, a United States Court of Appeals for the Fifth Circuit panel issued an order to vacate the order on Dec. 23 made by a different panel in the same court.
Congressional Legislation Introduced to Repeal or Delay CTA
Congress also has weighed in recently under the new Trump administration. Here are the latest bills introduced in the House and Senate:
- Repeal of the CTA Re-Introduced in House and Senate: On Jan 15, 2025, Sen. Tommy Tuberville (R-AL) re-introduced the Repealing Big Brother Overreach Act, which would repeal the CTA. The Act was also re-introduced in the House by Rep. Warren Davidson (R-OH).
- Delay of the CTA Passes in the House; Introduced in Senate: On Jan. 28, House Rep. Zach Nunn (R-Iowa) introduced the Protect Small Business from Excessive Paperwork Act, which would delay CTA reporting by one year to Jan. 1, 2026, for companies formed prior to Jan. 1, 2024. Companies formed after Jan. 1, 2024, would have to comply with the reporting deadlines as is.
Conclusion
Outside of Congressional movement and/or a Trump executive order to repeal the CTA, enforcement is back on, and a new March deadline has been set. Please feel free to contact legal counsel and/or your accountant to get your reporting information in order.
Adams and Reese will continue to monitor further guidance by FinCEN in response to the latest decision.
