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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.
