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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.
