Treasury Department Announcement on Enforcement and Scope of Corporate Transparency Act

In the past two-and-a-half weeks, the Corporate Transparency Act (CTA) world has been buffeted with jaw-dropping developments and announcements. Below is the chronology of the most recent CTA events and pronouncements.

Feb. 17, 2025. The last nationwide injunction imposed by a court that prohibited enforcement of the CTA beneficial ownership information (BOI) reporting rules was stayed (lifted), thereby reinstating the BOI reporting rule.

Feb. 18, 2025. In response to the lifting of the nationwide injunction, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) announced that BOI reporting requirements were reinstated with a March 21, 2025, filing deadline for most companies. FinCEN also announced there would be a further modification in filing deadlines prior to March 21, 2025, and would initiate a review process to evaluate BOI reporting rules to reduce burden for lower-risk entities. (See Holland & Knight's previous alert, "Corporate Transparency Act: It's Back," Feb. 19, 2025.)

Feb. 27, 2025. FinCEN announced that 1) it will not issue any fines or penalties or take any other enforcement action against any companies based on any failure to file or update BOI reports by the current deadlines, 2) 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, 3) no later than March 21, 2025, FinCEN intends to issue an interim final rule that extends BOI reporting deadlines and 4) FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements. 

March 2, 2025. The Treasury Department announced a press release discussed below.

March 3, 2025. In a litigation, the CTA was declared unconstitutional by the U.S. District Court for the Western District of Michigan. The court found that BOI reporting under the CTA violates the Fourth Amendment's prohibition on unreasonable search and seizure. In addition, the court ruled that the plaintiffs in the case would not be subject to the CTA.

March 3, 2025. In a stipulated motion (whereby both parties to the litigation agree) to withdraw a motion for a preliminary injunction in the U.S. District Court for the District of Utah, the pleading stated that the Treasury Department had announced that it will not enforce the CTA against U.S. citizens and is suspending fines and deadlines to file.

The March 2, 2025, Announcement

The Treasury Department, the organization of which FinCEN is a bureau, issued a press release stating the following:

• There will be no enforcement of any penalties or fines associated with BOI reporting under the existing regulatory deadlines.
• There will be no enforcement of any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect.
• The Treasury Department will issue proposed rulemaking to narrow the scope of the BOI reporting rule so that only certain foreign companies registered to do business in the U.S. would be required to submit BOI information.
• President Donald Trump and Treasury Secretary Scott Bessent both issued statements expressing support for these efforts.

Holland & Knight Comments

• Though the FinCEN announcements and Treasury Department press release do not have the force of law, they signal the Trump Administration's new direction with respect to the CTA.
• The FinCEN new rulemaking process has not yet commenced, and the outcome is uncertain.
  • In addition to BOI filing requirements for certain foreign companies, FinCEN also could propose retaining reporting requirements for some U.S. companies, particularly those that are owned or controlled by non-U.S. citizens such as individuals who are residents or non-residents for U.S. tax purposes.
  • In terms of impacted foreign reporting companies, note that although the following numbers are just estimates and could change depending upon the forthcoming rules, FinCEN's September 2022 Federal Register publication that set forth the BOI reporting rule estimated that nearly 71,000 foreign entities operating in the U.S. could be subject to BOI reporting requirements and that approximately 10,890 new foreign entities would become subject to the reporting requirements annually thereafter. Contrast these estimates to the prior FinCEN estimates of the more than 32 million entities considered reporting companies under the CTA. 
• Several constitutional challenges to the CTA are still working their way through the courts, including an appeal of the federal court ruling in Alabama that the law is unconstitutional, as well as an appeal of federal court rulings in Texas that a nationwide injunction against the CTA's reporting requirements should be in place while courts assess the law's constitutionality.
• It remains to be seen whether the Treasury Department's new approach to the CTA will affect the government's defense of the CTA in any of the ongoing cases, including the holding of a recently decided Michigan case finding the law to be unconstitutional. Interestingly, the Treasury Department press release has affected the litigants, as evidenced in the Utah case, referred to above.
• Unless the CTA itself is amended or repealed, some commentators have suggested that the administration's failure to now fully implement the reporting requirements set forth in the statute also could be challenged in court.
• Bills have been introduced in Congress that would extend the reporting deadlines for pre-2024 reporting companies and another that would repeal the CTA entirely.

What’s Next?

Further announcements or releases from FinCEN and/or the Treasury Department are anticipated not later than March 21, 2025.

So, stay tuned for developments and take action accordingly.

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.