CTA Task Force
On Jan. 1, 2024, the Corporate Transparency Act (CTA) took effect, requiring non-exempt U.S. entities and non-exempt foreign entities registered to do business in the United States to submit beneficial ownership information (BOI) reports to a confidential database maintained by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The CTA and its implementing regulations mandate that certain U.S. legal entities and foreign entities registered to do business in the United States (collectively, Reporting Companies) report certain BOI to FinCEN. According to FinCEN, this reporting requirement is intended to enhance the ability of FinCEN and other agencies to protect the U.S. financial system from illicit use, bringing the United States in line with at least 30 other countries that have implemented some form of central register of BOI.
The CTA represents a groundbreaking shift in how the federal government monitors beneficial ownership of U.S. Reporting Companies. With an estimated 32.6 million companies expected to comply with the CTA, companies must be aware of the CTA’s broad applicability to entities within their structures. To prepare for compliance, reporting companies should familiarize themselves with the CTA’s requirements and establish internal processes for identifying and updating information on beneficial owners, including boards of directors, foreign affiliates, senior officers, and those controlling a company.
UPDATE: On Feb. 27, 2025, FinCEN issued a press release announcing, among other things, that it plans to issue an interim final rule by March 21, 2025 (the current reporting deadline for most companies), extending beneficial ownership information (BOI) reporting deadlines and providing further guidance.
On March 2, 2025, the U.S. Department of the Treasury (Treasury) published a press release stating that it will not impose any penalties or fines on U.S. citizens, domestic reporting companies, or their beneficial owners for failure to comply with CTA reporting requirements. Further, Treasury announced its intent to issue a proposed rulemaking to narrow the scope of the BOI Reporting Rule to foreign reporting companies only.
What Does This Mean?
- The CTA remains in effect; these public announcements do not, in themselves, suspend any legal or regulatory requirement.
- We expect FinCEN will delay/revise the current March 21, 2025, filing deadline through an interim final rule that will be issued no later than March 21, 2025. Unlike final rules that go through notice-and-comment, interim final rules may become effective the date they are published.
- Based on the recent announcement, FinCEN will likely modify the BOI Reporting Rule, including potentially limiting its scope to foreign reporting companies (e., foreign (non-U.S.) entities registered to do business in the U.S.). Such a change could prompt legal challenges, though it is unclear at this point who would challenge such action.
Takeaways
Given the uncertain future of the CTA and the fact that FinCEN has yet to publish new reporting deadlines through interim rulemaking, Reporting Companies may consider continuing to prepare their BOI reports (without actually filing them) until FinCEN publishes its interim rulemaking, which will provide clearer guidance on the new reporting deadlines and scope of affected companies.
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PREVIOUS UPDATE: On Feb. 18, the U.S. District Court for the Eastern District of Texas issued an order staying the Smith injunction against the Corporate Transparency Act (CTA) during the pendency of FinCEN’s appeal. This reinstates the effectiveness of the CTA and its implementing regulations in their entirety.
On Feb. 19, FinCEN issued a statement in response to the District Court order in Smith, et. al. v. U.S. Department of the Treasury, advising that beneficial ownership information (BOI) reporting requirements under the CTA are back in effect as follows:
- The new deadline to file initial, updated, and/or corrected BOI reports is no later than March 21, 2025.
- Reporting companies that were previously given a reporting deadline later than March 21, 2025, must file their initial BOI report by such later deadline (i.e., companies that qualify for certain disaster relief extensions and companies formed after March 1, 2025).
FinCEN indicated that from now until the March 21 deadline, FinCEN will assess its options to further modify reporting deadlines, prioritizing reporting requirements for those entities that pose the most significant national security risks. FinCEN will inform the public before the March 21 deadline of any further modification of the reporting deadlines.
Oral arguments for the Fifth Circuit appeal in Texas Top Cop Shop, Inc. v. McHenry, which have been expedited, are scheduled for March 25, 2025. In the meantime, absent further relief by the courts, U.S. Congress or FinCEN, reporting companies should continue to work through their BOI filings and be prepared to file by the dates indicated above.
PREVIOUS UPDATE: On Jan. 23, 2025, the U.S. Supreme Court granted the U.S. government’s request for a stay of the nationwide preliminary injunction of the CTA issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. McHenry.
What does this mean? According to the brief order, the stay remains in effect pending disposition of the appeal before the Fifth Circuit and subsequent disposition of a petition for a writ of certiorari, if any. Oral arguments for the expedited Fifth Circuit appeal are scheduled for March 25, 2025.
PREVIOUS UPDATE: On Dec. 26, 2024, the Fifth Circuit issued an order reinstating the nationwide preliminary injunction against the CTA.
What does this mean? While this new order remains in effect, the CTA is enjoined and companies are not required to file BOI reports. Given the incredible back-and-forth to date, we still recommend that clients position themselves to be able to file in relatively short order, in the event this flips again (knowing that FinCEN issued a brief grace period this last time). At some point, FinCEN will either exhaust its appellate options or will issue more definite guidance that, we hope, will prevent us from continuing this see-saw, which we know is a source of frustration to clients. FinCEN has not yet updated its website to reflect this new development.
How did this happen? FinCEN’s motion for emergency stay of the injunction was heard by a randomly assigned “motions panel” of the Fifth Circuit (which is typically different than the “merits panel” that will ultimately hear the appeal months later). Now that the merits panel has been assigned on an expedited basis, that panel (or the full en banc court) decided to reinstate the injunction to “preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” The order does not indicate which judges participated in the ruling. On Dec. 27, 2024, an expedited briefing schedule was entered, which will have the case fully briefed by the end of February.
Read: Fifth Circuit Reinstates National Injunction
PREVIOUS UPDATE: Fifth Circuit Reinstates Corporate Transparency Act; FinCEN Grants Modest Grace Period for Filings
On Dec. 23, 2024, a Fifth Circuit panel issued an order staying the nationwide preliminary injunction a district court in Texas issued against the Corporate Transparency Act (CTA), reinstating the effectiveness of the CTA and its implementing regulations in their entirety pending appeal, including, but not limited to the Jan. 1, 2025, deadline for filing of beneficial ownership information (BOI) reports by reporting companies formed prior to Jan. 1, 2024.
In response, FinCEN issued guidance which, among other things, extends a modest additional grace period for pre-2024 companies to file BOI reports. In particular, pursuant to this FinCEN guidance, entities formed prior to Jan. 1, 2024, will have until Jan. 13, 2025, to file BOI reports with FinCEN. Though short-term, this may be welcome relief for existing reporting companies worried about their ability to file over the holidays.
Read: Fifth Circuit Reinstates CTA’s Jan. 1, 2025 Deadline
PREVIOUS UPDATE: On Dec. 5, 2024, FinCEN filed a notice of appeal from the preliminary injunction issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 U.S. Dist. LEXIS 218294 (E.D. Tex. Dec. 3, 2024). Around the same time, FinCEN updated its website with a statement that acknowledges the nationwide preliminary injunction and confirms that “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.” The statement goes on to note that Reporting Companies may “voluntarily” submit BOI Reports while the nationwide injunction remains in effect.
As we previously advised, companies may wish to continue working through their analyses and forms to be prepared to comply with the CTA by the filing deadline in case the nationwide injunction is stayed, lifted, or otherwise made ineffective. Companies contemplating on submitting a “voluntary” BOI Report to FinCEN should consult with counsel to assess the risks and benefits of doing so.
GT monitors developments involving the CTA on an ongoing basis (including recent challenges), as well as legislation by individual states to enact similar disclosure requirements.
Helpful Links:
Beneficial Ownership Information Reporting | FinCEN.gov
Beneficial Ownership Information | FinCEN.gov
Beneficial Ownership Information FAQs | FinCEN.gov
BOI Informational Brochure (FinCEN.gov)
Notice regarding Hurricane Milton (FinCEN.gov)
Notice regarding Hurricane Helene (FinCEN.gov)
Notice regarding Hurricane Debby (FinCEN.gov)
Notice regarding Hurricane Beryl (FinCEN.gov)
Notice regarding Hurricane Francine (FinCEN.gov)
GT Links:
CTA Countdown: Upcoming FinCEN Filing Deadlines | Insights | Greenberg Traurig LLP (gtlaw.com)
NY Gov Signs Amended LLC Transparency Act | Insights | Greenberg Traurig LLP (gtlaw.com)