Updates on Filing under the Corporate Transparency Act (“CTA”) (2/27/25; 3/4/25)

Added 3/4/25 10:00 am: Please note below that, on March 2, 2025, Treasury announced here that 

(i) Treasury will not enforce penalties or fines associated with the beneficial ownership reporting requirements of the Corporate Transparency Act, even after the anticipated interim final rules are promulgated;

(ii) Treasury in the near future will  issue "a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only."

That background for all this is that, because of the lack of transparency of U.S. entities, the U.S. consistently rates high on lists of tax haven countries, all the while the U.S. complains about foreign countries' lack of transparency. The CTA was designed to address lack of transparency. Most practitioners I know felt that it was required to address money laundering and related genres of crime. Yet, in an announcement that reads more like a political paper (see the link above), Treasury is giving up enforcing that which the statute clearly requires. On the political nature of the announcement, Trump went on his social media outlet very soon after bragging about it.

On February 18, 2025, FinCEN, noting that it was no longer enjoined from enforcing the filing requirements of the CTA, advised that the filing must be done, except in narrow cases, by March 21, 2025. See FinCEN Extends Beneficial Ownership Information (FinCEN 2/18/25), here. The document is short (2 pages), so all interested in filing should read it.

On February 10, 2025, the House passed unanimously the Protect Small Businesses from Excessive Paperwork Act, H.R. 736, unanimously. That Act modifies the filing deadline to January 1, 2026 instead of by January 1, 2025, as required under current regulations. See H.R.736 - Protect Small Businesses from Excessive Paperwork Act of 2025 at Congress.Gov, here; and Maureen Leddy, House Passes Bipartisan Bill to Delay Corporate Transparency Act Deadline (ThomsonReuters 2/14/25), here.

I expect that the Senate will pass the legislation and that President Trump will sign it. Further, I expect that, since the CTA is disliked by certain portions of the Trump followers in both houses, there will be some legislative commotion prior to that delayed deadline to address some of the features in the CTA. I have no prediction on whether that commotion will result in legislation defanging the CTA. Stay tuned.

Added 2/28/25 12:00pm 

On 2/27/25 FinCEN issued this public notice: FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines (FinCEN 2/27/25), here. The notice is short, so I just copy and paste the contents (bold face supplied by JAT):

Today, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines. 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. This announcement continues Treasury’s commitment to reducing regulatory burden on businesses, as well as prioritizing under the Corporate Transparency Act reporting of BOI for those entities that pose the most significant law enforcement and national security risks.

No later than March 21, 2025, FinCEN intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.

FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements. FinCEN will consider those comments as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities, as well to determine what, if any, modifications to the deadlines referenced here should be considered.

The interim final rule is like a Treasury Temporary Regulation that sets an enforcement or application date prior to the Final Regulation after notice and comment. 

Supreme Court Stays District Court Injunction Against Filing Requirements of Corporate Transparency Act (1/24/25; 1/26/25)

Corporate Transparency Act Case Overview

The first Corporate Transparency Act ("CTA") case to reach the Supreme Court involved a preliminary skirmish over a district court’s universal injunction. This injunction prevented the Treasury and the IRS from enforcing the filing requirements of the Corporate Transparency Act (“CTA”). For more details, see Texas District Court Enjoins the Corporate Transparency Act Nationwide (Federal Tax Procedure Blog (12/5/24; 1/6/25), here, as well as the articles linked below.

Legal Proceedings

The district court action consisting of holding the CTA unconstitutional and enjoining the CTA spawned the following:

1.   Appeal on the Merits: The appeal on the merits to the Fifth Circuit is currently pending expedited consideration.

2.   Requests to Lift the Injunction: Requests to lift the injunction filed (i) in the Fifth Circuit, which ultimately denied the request, and then (ii) in the Supreme Court where it was docketed as No. 24A653, here.

Supreme Court Order

On January 23, 2025, the Supreme Court entered an order on the docket (No. 24A653), here:

Application (24A653) for stay presented to Justice Alito and by him referred to the Court is granted. The December 5, 2024 amended order of the United States District Court for the Eastern District of Texas, case No. 4:24–cv–478, is stayed pending the disposition of the appeal in the United States Court of Appeals for the Fifth Circuit and disposition of a petition for a writ of certiorari, if such a writ is timely sought. Should certiorari be denied, this stay shall terminate automatically. In the event certiorari is granted, the stay shall terminate upon the sending down of the judgment of this Court. Justice Gorsuch concurring in the grant of stay. (Detached Opinion). Justice Jackson dissenting in the grant of stay. (Detached Opinion)

Media Coverage

Texas District Court Enjoins the Corporate Transparency Act Nationwide (12/5/24; 1/24/25)

On 12/31/24, the Solicitor General filed for the United States an Emergency Application for a stay of injunction issued by the United States District Court pending appeal. See paragraph 8 below. On 1/23/25, the Supreme Court stayed the district court injunction. See Supreme Court Stays District Court Injunction Against Filing Requirements of Corporate Transparency Act (Federal Tax Procedure Blog 1/24/25), here.

In Texas Top Cop Shop, Inc. v. Garland, ___ F.Supp.4th ___, 2024 U.S. Dist. LEXIS 218294 (ED TX 12/3/24), GS here [here] and CL here, the Court ordered a preliminary nationwide (or universal) injunction enjoining enforcement of the Corporate Transparency Act, codified at 31 U.S. C. § 5336. (The relief is sometimes called vacatur under the APA which has the same effect of a nationwide injunction, see Slip Op. p. 77.)

Four courts have spoken on the issue, with two granting preliminary injunctions (with different scopes as noted) and two denying preliminary injunction.

Granting preliminary injunction:

• Nat'l Small Business United v. Yellen, ___ F. Supp.4th ___, 2024 WL 899372 , 2024 U.S. Dist. LEXIS 36205  (N. D. Ala. 2024), GS here and CL here; and
• Texas Top Cop Shop, Inc. v. Garland, ___ F.Supp.4th ___, 2024 U.S. Dist. LEXIS 218294  (W.D. TX 12/3/24), GS here [to come] and CL here.

Denying preliminary injunction

• Community Assocs. Inst. v. Janet Yellen, 2024 U.S. Dist. LEXIS 193958 (E.D. Va. 10/25/24), GS here and CL here; and
• Firestone v. Yellen, 2024 WL 4250192, 2024 U.S. Dist. LEXIS 170085 (D. Or. Sep. 20, 2024), GS here and CL here

 All of the cases are on appeal, with the Alabama case being fully briefed.

The difference between the two sets of cases is the courts’ respective assessments of the likelihood of prevailing on the merits. Those cases granting the preliminary injunctive relief held that the CTA was unconstitutional, thus satisfying the preliminary injunction requirement that the plaintiffs be likely to prevail. Those cases denying the preliminary injunctive relief held that the CTA was likely constitutional, thus plaintiffs had not satisfied the requirement that they would likely prevail,

In any event, the Texas Top Cop Shop injunction until changed means that the CTA cannot be enforced. Of course, I am sure that there has been significant filings by now. The injunction should prevent FinCEN from using the data or making it available to persons who, under the CTA, could have access.

Finally, I said before in blogging on the Alabama case: “This opinion is dumb, stupid.” The Texas case is wrapped in a greater fog of words, but alas in my view, is also dumb, stupid. For context in assessing my assessment, I am not a constitutional law scholar. But, I don’t think the Constitution should be interpreted so rigidly that reasonable accommodations to the world we live in now (rather than over 200 years ago) cannot be made in governing doctrines. Constitutional text cannot be ignored but it can be interpreted reasonably. I think the Courts in the Virginia and Oregon cases made those accommodations.

Other JAT Comments:

District Court in ND Alabama Holds the Corporate Transparency Act Unconstitutional (3/4/24)

In Nat'l Small Business United v. Yellen et al. (N. D. Ala. No. 5:22-cv-1448-LCB Dkt 52 3/1/24), CL here, the Court declared the Beneficial Ownership reporting requirements of the Corporate Transparency Act unconstitutional and enjoined its application against the defendants in the case.  For more on the Beneficial Ownership Information requirements, see the FinCEN page here. The judgment in the case is here.

The Court starts its opinion with the following: 

            The late Justice Antonin Scalia once remarked that federal judges should have a rubber stamp that says STUPID BUT CONSTITUTIONAL. See Jennifer Senior, In Conversation: Antonin Scalia, New York Magazine, Oct. 4, 2013. The Constitution, in other words, does not allow judges to strike down a law merely because it is burdensome, foolish, or offensive. Yet the inverse is also true—the wisdom of a policy is no guarantee of its constitutionality. Indeed, even in the pursuit of sensible and praiseworthy ends, Congress sometimes enacts smart laws that violate the Constitution. This case, which concerns the constitutionality of the Corporate Transparency Act, illustrates that principle.

That’s a cute opening for a final conclusion of unconstitutionality that is, in my gut reaction, constitutionally suspect. Indeed my cute initial analysis (I do not offer a detailed analysis here) is:

This opinion is dumb, stupid.

I will be back to discuss it later when I have given more complete analysis. I will hold open the possibility that my initial reaction above is itself dumb, stupid. (That will not be the first time.) But for now, until further analysis drives me to a different conclusion, I stick to the dumb, stupid characterization.

In the meantime, I do note that the injunction is limited to the plaintiffs only. The court does not attempt universal vacatur which itself is a bit suspect. So, at least,. it is modest in its holding as to the effect of the unconstitutionality holding.

Added 3/5/24 8am Eastern Time: