Author: Johnna Wahrman

Today, in yet another development in the Corporate Transparency Act’s (CTA) ongoing legal battles, the judge in Smith v. United States Department of the Treasury issued a stay on the preliminary relief granted to the plaintiffs, which was effectively halting the enforcement of the CTA nationwide. This was the last remaining hurdle preventing the government from enforcing the CTA. With the stay now in place, the government can begin enforcing the CTA and its reporting rule.

This decision follows the Supreme Court’s action on January 25, 2025, when it stayed the nationwide preliminary injunction in the related Texas Top Cop Shop, Inc. v. Garland case.  

What Does This Mean?

Despite these recent developments, the CTA still faces ongoing challenges. Along with the granted extension, FinCEN acknowledged that during this period “it will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks” This indicates that the reach of the reporting rule may be subject to change and/or deadlines may shift. As of now the deadline for filings is set for the majority of reporting companies is March 21, 2025. 

To no surprise of those who have been staying up to date with CTA developments, the situation remains fluid. Last week, the House of Representatives unanimously passed H.R. 736, a bill that has caused some confusion. Some believe it sets a firm reporting deadline of January 1, 2026, for pre-2024 entities, while others interpret it as a “cap” to the deadline at that date, leaving room for FinCEN to set an earlier deadline. The bill still requires Senate approval and the president’s signature. 

Whatever the case, it is crucial to be aware of any changes, as non-compliance fines have now risen to over $600 per day. 

What’s Next?

Despite these developments, while the Corporate Transparency Act is now enforceable, it still faces ongoing legal challenges. The Fifth Circuit is set to hear oral arguments on April 1, 2025, in Texas Top Cop Shop, Inc. v. Garland. A decision from the Eleventh Circuit Court of Appeals in National Small Business United v. U.S. Department of the Treasury also remains looming. Since the Smith case is also being litigated in the Fifth Circuit, if appealed, there is a chance the two cases could be consolidated, potentially leading to further rescheduling of the oral arguments. 

Hopefully, with this decision, we can finally see an end to the whipsaw legal status of the CTA, allowing businesses, business owners, and professionals to better understand what is expected of them—at least in the near future.

With the new administration showing a strong commitment to upholding the CTA, and other rulings in the U.S. in support of the CTA (last week a federal district judge in Maine ruled the CTA likely constitutional) it appears that the Act is here to stay in some form. 

On February 5, 2025, the United States government filed a motion to appeal the nationwide stay on the reporting rule in Smith v. United States Department of the Treasury. The motion was submitted in response to the nationwide stay issued by a federal district court in Texas, which temporarily suspended the enforcement of the Corporate Transparency Act’s (CTA) reporting requirements. 

In its motion, the government contends that the court should reconsider the preliminary relief that includes the nationwide stay on the reporting rule, urging alignment with the United States Supreme Court’s recent decision to lift the stay on the nationwide injunction against the CTA.  

Additionally, the government indicated that, should the stay on the reporting rule be lifted, the Financial Crimes Enforcement Network (FinCEN) plans to issue a 30-day extension to the reporting deadlines presumably from the date the stay is lifted. FinCEN stated it would also consider potential changes to the reporting rule to reduce the burden on “low-risk entities,” although these adjustments would depend on whether the government deems such changes “warranted.”

For professionals assisting clients with Beneficial Ownership Information (BOI) filings, it is important to note that a removal of the stay, coupled with the 30-day extension, could place the new filing deadlines right in the midst of tax season. Firms that have not already done so should begin planning how to allocate sufficient time to gather and collect the necessary information from clients to ensure compliance, in the case the CTA’s reporting rule becomes enforceable.  

Even with the potential repeal of the stay on the reporting rule, the CTA still faces legal challenges. The Fifth Circuit is set to hear oral arguments over the constitutionality of the CTA in Texas Top Cop Shop, Inc. v. Garland on March 25. The complete settlement of this case could come after the initial reporting deadline has passed, including the 30-day extension that would be put in place should the Smith stay be lifted. The government’s decision to appeal the Smith case however is significant, as it underscores the new administration’s commitment to defending the CTA’s constitutionality and its intent to continue addressing the pressing the legal matters left by the previous administration. 

Washington, D.C. — The United States Supreme Court issued a crucial decision granting a stay on the nationwide injunction on the CTA on January 23rd, 2025. The decision, made in relation to case No. 4:24–cv–478 from the United States District Court for the Eastern District of Texas, halts the enforcement of the December 5th, 2024, nationwide injunction.

The application for the stay (24A653), initially presented to Justice Samuel Alito, was granted. The stay will remain in effect pending the outcome of an appeal in the United States Court of Appeals for the Fifth Circuit and the resolution of a potential petition for a writ of certiorari. Notably, Justice Jackson issued the lone dissenting opinion in the case.

This may sound like the CTA is fully enforceable again, placing all businesses that have not yet filed at potential legal risk pending further action, however, it is not this simple due to other existing court cases.

What Does It Mean for the CTA?

Although the Supreme Court’s ruling reinstates the enforcement of the CTA, obstacles remain that continue to prevent full implementation of its requirements. In early January another federal district judge in Texas in Smith v United States Department of The Treasury placed a nationwide stay on the effective date of the reporting rule not the law itself. What does this mean in general terms? The following is guidance straight from FinCEN’s website:

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Beneficial Ownership Information reports are still currently voluntary despite the Supreme Court’s recent stay.

What’s Next?

While FinCEN has not yet appealed the decision in the Smith case, they are likely to do so. If the appeal is successful and the stay is lifted, the CTA and its reporting requirements could resume in full force. It is important to closely monitor developments in this case, as the removal of the stay may require businesses to file quickly to avoid steep penalties.

The Fifth Circuit Court of Appeals will hear oral arguments in Texas Top Cop Shop, Inc. v. Garland regarding the constitutionality of the CTA, starting March 25, 2025.