Understanding the Legal Landscape
and Preparing for What Comes Next
By Lauren T. Lamb, Esq.
When we last reported on the Corporate Transparency Act (“the Act” or “CTA”) in February of 2024 (here), it required that all filings had to be submitted by January 1, 2025. As the original deadline neared, a flurry of activity in the courts resulted in major changes and this legal saga continues to unfold in 2025. This is a federal issue but one that impacts local business owners and our clients.
Key Developments in Recent Legal Cases
It has been a hectic few months of back-and-forth as the CTA faces challenges in the courts. Here is a quick overview of the rulings that have been issued so far and their impact on the Act’s deadlines.
- December 3, 2024 – the U.S. District Court for the Eastern District of Texas found the CTA to be unconstitutional and issued an order granting a nationwide temporary injunction against the CTA. As a result of this order, reporting companies were not required to comply with the CTA while such temporary injunction remained in place. (Texas Top Cop Shop, Inc., et al. v. Garland, et al.)
- In response to the December 3rd order, FinCEN acknowledged that reporting companies were not required to submit filings while the injunction remained in place, but that it would accept voluntary submissions.
- December 23, 2024 – the U.S. Court of Appeals for the Fifth Circuit granted a stay of the preliminary injunction. This meant that the CTA was once again in effect and companies were required to comply with the reporting requirements.
- In response to the December 23rd order, FinCEN extended the deadline for BOI initial reporting from January 1, 2025 to January 13, 2025 and issued additional guidance on the timing of reporting requirements for companies formed in 2024. (“BOI” or Beneficial Ownership Information is the body of information being required to be reported by the Act.)
- December 26, 2024 – the U.S. Court of Appeals for the Fifth Circuit lifted the stay on the preliminary injunction and vacated the Fifth Circuit’s decision on December 23, 2024, to stay the nationwide injunction issued on December 3, 2024. As a result, reporting companies were once again not required to comply with the CTA while the injunction remained in place.
- January 2, 2025 – FinCEN announced that the mandatory reporting requirements under the CTA were temporarily suspended (yet again) due to the ongoing litigation.
- January 23, 2025 – the U.S. Supreme Court stayed the injunction in one of the lower court cases (Texas Top Cop Shop, Inc. v. McHenry) that had served to suspend CTA filings in December. The other injunction (the “Smith injunction”) remains in place, meaning that CTA filings are still considered to be optional, but not required.
In summary, the compliance/filing deadline was blocked, affirmed as blocked, reinstated (“unblocked”), extended, and then blocked once again — all in the span of one month!
What’s next?
A hearing has been scheduled for March 25, 2025. At this hearing, the Fifth Circuit will consider the appeal by the Department of Justice of the U.S. District Court ruling.
In the meantime, what should business owners do?
Business owners are not legally required to file under the CTA at this time, but may elect to submit voluntary filings. If you have not already submitted your filing and would prefer to wait and see how this dispute shakes out in the courts, another option would be to gather BOI and prepare to comply with the CTA by promptly submitting a filing in the event that the CTA is reinstated by FinCEN.
We understand that you may be confused and frustrated by this issue and how to proceed despite the uncertainty as to if and when this may be resolved. We can assist and will help advise you on the choice that makes the most sense for you and your business. If you have questions about the Corporate Transparency Act and would like to consult with an attorney, please contact Lauren T. Lamb, Esq. at llamb@sgrwlaw.com.
Our prior articles on the Corporate Transparency Act:
|
