Corporate Transparency Act: It's Back

In Smith v. United States Department of the Treasury, et al., the U.S. District Court for the Eastern District of Texas on Feb. 17, 2025, granted the government's motion to stay the order granting preliminary relief pending the disposition of the appeal before the U.S. Court of Appeals for the Fifth Circuit. The effect of the ruling means that Corporate Transparency Act (CTA) reporting obligations have been reinstated, pending appeal and subject to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) 30-day deadline extension from the date of FinCEN's Feb. 19, 2025, announcement.

The motion was granted in light of the U.S. Supreme Court's order of Jan. 23, 2025, in McHenry v Texas Top Cop Shop. Inc., granting the government's application for a stay. (See Holland & Knight's previous alert, "Supreme Court Stays CTA Injunction in Texas Top Cop Shop Case, but CTA Reporting Still on Hold," Jan. 24, 2025.) As a result, the nationwide injunction that prohibited enforcement of FinCEN's beneficial ownership information (BOI) reporting rules no longer applies, and the reporting of BOI is once again required. 

The government in its motion for a stay, along with FinCEN in a post on its website, also announced that if a stay were granted, there would be a 30-day delay in reinstituting the BOI reporting provisions and a reevaluation of reporting requirements and deadlines for lower-risk entities, along with a concomitant prioritization of reporting for those entities that pose the most significant national security risks.

FinCEN Announcement

On Feb. 19, 2025, FinCEN posted a new alert to the effect that reporting requirements were back in effect. This announcement contained information about reporting deadlines and possible modifications to the CTA's reporting requirements and deadlines.

New Reporting Deadlines

• 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 modification of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.
• Reporting companies that were previously given a reporting deadline later than the March 21, 2025, deadline must file their initial BOI reports by that later deadline. For example, if a company's reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.

Possible Modifications to the CTA

Consistent with the stated policy goal of the Trump Administration relating to regulatory burdens, FinCEN made the following announcement:

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.

Comments

• The 30-day extension to file initial, updated and/or corrected BOI reports until March 21, 2025, is a welcome relief in light of the off-again/on-again saga of court decisions relating to BOI reporting.
• So, too, is the updated deadline beyond March 21, 2025, for reporting companies that were previously given a later reporting deadline.
• Interestingly, FinCEN has given itself leeway to extend further the reporting date if reporting companies may need additional time to comply with their BOI reporting obligations. Though FinCEN's intent to initiate a process to revise the BOI reporting rule for lower-risk entities also is commendable, absent a further extension of the reporting deadline, lower-risk entities may be unable to benefit from any relaxation of their reporting burdens in complying with the current reporting deadlines. As previously suggested, FinCEN should have prioritized its review and implementation of any relief prior to reinstituting the reporting deadline.
• Query whether the U.S. Congress will intercede, particularly with respect to the enactment of the Protect Small Business from Excessive Paperwork Act of 2025, which would provide relief to reporting companies formed prior to Jan. 1, 2024, with respect to their initial filings, but not to other reporting companies or filings? The bill unanimously passed the U.S. House of Representatives, and Sen. Tim Scott (R-S.C.) introduced a companion bill in the U.S. Senate. It remains to be seen whether the Senate now will act to pass the bill, as well as whether more comprehensive legislative reform will be considered.
• Bottom line: Reporting companies and their beneficial owners must remain vigilant and closely follow developments, as the CTA saga could continue to be tortuous and controversial.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.