You could easily be forgiven for not knowing the current state of the Corporate Transparency Act (“CTA”) following the Fifth Circuit’s holiday flip-flop…or the Supreme Court subsequently weighing in…or Congress’s umpteenth attempt to push off the law’s effective date…or the recent flurry of FinCEN press releases. But the most important recent announcement arrived on an otherwise quiet Sunday afternoon, when the Treasury Department announced on March 2, 2025, that they were suspending enforcement of the CTA against U.S. citizens and domestic companies and planning to issue proposed regulations narrowing the scope of the law just to foreign entities.
Just days earlier, on February 27, 2025, FinCEN had announced that pending the issuance of an “interim final rule,” it would temporarily not impose penalties or take any other enforcement action against any companies that failed to comply with the previously announced March 21, 2025, filing deadline. The February 27, 2025, release noted that the “interim final rule” would extend the current CTA reporting deadlines, while a future notice of proposed rulemaking would “minimize burden[s] on small businesses.” With the subsequent announcement from the Treasury Department, it is not clear whether FinCEN still intends to issue an “interim final rule” or whether the suspension of enforcement against domestic companies and U.S. citizens supersedes that plan.
What is clear is that, until further notice, domestic reporting companies will not be penalized for the failure to timely file beneficial ownership information (“BOI”) reports under the CTA. It appears that foreign reporting companies, i.e., companies formed in another country that are registered to do business in the United States, will not be penalized for failure to meet the March 21 deadline, but will be required to meet a future deadline to be named in either proposed regulations or an “interim final rule.”
So how did we get here, and, crucially, does Treasury’s March 2 announcement mean the end to the whiplash businesses have been subjected to?
A Brief Recap
The CTA officially went into effect on January 1, 2024, requiring beneficial ownership reporting for an expected 30 million+ companies formed or registered to do business in the United States. While the original regulations gave companies newly formed or registered in 2024 and later just 30 days to file such reports, a one-time exception extended that timeline out to 90 days for companies formed or registered in 2024. Entities formed or registered before 2024 were given until January 1, 2025, to make their initial filing. It should come as no surprise that the pace of filings picked up significantly in the fourth quarter of 2024 and even more significantly as year-end approached. Then, on December 3, 2024, the Eastern District of Texas gave us all an early holiday gift: a nationwide injunction of the CTA in the Texas Top Cop Shop case. Could a single federal district court judge really enjoin enforcement across the whole country? FinCEN thought so and announced on its website that filing was, for the moment, voluntary.
As most people were settling in for their winter break, the Fifth Circuit issued a dizzying self-reversal. On December 23rd, the Appeals Court stayed the controversial injunction, sending practitioners and FinCEN scrambling. FinCEN quickly issued a brief extension of time to file for entities facing a December 31 deadline. A mere three days later, however, a different panel of the Fifth Circuit reversed itself – the injunction was back on! Texas Top Cop Shop was, for now, the law of the land.
On New Year’s Eve, the Biden administration appealed the Fifth Circuit’s decision to leave the nationwide injunction in place to the Supreme Court. Following the submission of the parties’ briefs, as well as those from an impressive 17 amicus curiae, the Supreme Court granted a stay of the injunction on January 23, 2025.
One would think that would have solved the issue, restoring the CTA to fully active status, and reinstating the filing requirements with a handful of exceptions (like the plaintiffs in the NSBU case out of the Northern District of Alabama, the appeal of which has been sitting with the Eleventh Circuit since last September). However, with the new Trump administration came a new view on the CTA. The unofficial Trump transition playbook, Project 2025, famously included a call to repeal the CTA, and Congressional Republicans had made several attempts under Biden to repeal or delay the law. Thus, it came as no surprise when the new administration opted to keep the CTA on hold, notwithstanding the Supreme Court’s lifting of the Texas Top Cop Shop injunction, relying on a second (subsequent) nationwide injunction from the Northern District of Texas in the Smith v. Treasury case. The Trump administration had found an elegant way to keep the CTA on ice, even in the face of a Supreme Court decision lifting a practically identical injunction.
But that’s not the end of the story. In addition to the cases working through the system in Alabama and Texas, where the courts found the CTA unconstitutional (or at least likely to be unconstitutional), two district courts in other states held the opposite and have appeals pending in the Fourth and Ninth Circuits. And another case, recently decided in Maine, may soon find its way to the First Circuit. What was the Trump administration going to do with those cases – ones where the prior administration was defending the CTA’s constitutionality and urging for continuing enforcement of the law? Would it simply flip the narrative, arguing to uphold the decisions in the Fifth and Eleventh Circuits and arguing against the constitutionality of the law in the Fourth and Ninth? What precedent was there for the DOJ to argue that a law duly passed by Congress was unconstitutional?
On February 5, less than two weeks after relying on the Smith injunction to keep CTA reporting voluntary, the DOJ filed a motion in the Eastern District of Texas asking that the very same injunction be stayed in light of the Supreme Court’s stay in Texas Top Cop Shop. Two days later, the government filed a lengthy, impassioned defense of the CTA’s constitutionality in the Fourth Circuit.
A few hints at the current administration’s views on the law could be found in their recent court filings, which suggested that FinCEN’s new leadership was taking a hard look at how it could keep the CTA in place – despite continuing calls for its demise – while significantly reducing the reporting burdens. While the implementing regulations issued by the Biden administration hewed closely to the law itself, the new administration seems to have keyed in on an important feature of the law as enacted by Congress, namely the ability to add further reporting exemptions where it is determined that collecting data from a class of entities would neither serve the public interest nor be “highly useful in national security, intelligence, and law enforcement agency efforts to [address] money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.” This would appear to be good news for homeowners’ associations, who have strongly objected to being subject to CTA reporting.
The current leadership at FinCEN also seems to have taken to heart the “sense of Congress” included in the bill that enacted the CTA. That “sense” encouraged FinCEN to minimize burdens on reporting companies and provide clarity to reporting companies regarding who their beneficial owners are, among other things.
On February 18, the Eastern District of Texas lifted the nationwide injunction in the Smith case, effectively reinstating the CTA. In addition, the House unanimously passed a bill to allow FinCEN to forestall CTA implementation until January 1, 2026. With Treasury’s March 2 announcement, the question of whether or not to file BOI reports seems to have been put to rest for the time being, until and unless the courts and the administration change tacks again.
Kostelanetz attorneys are well-equipped to assist companies in assessing their reporting obligations in this changing regulatory environment and to assist companies who need or wish to voluntarily report with preparing and submitting BOI reports.
